MESIN UTAMA EKONOMI EROPA MULAI BERGERAK LAGI

LONDON--The U.K. economy is set to expand at the fastest pace for five years in the third quarter, the British Chambers of Commerce said Tuesday, in the latest sign that Britain's economic recovery is gathering momentum.

In a quarterly survey of its members, the BCC estimates the economy expanded by about 0.9% and 1% between July and September, the fastest quarter-to-quarter growth rate since summer 2007. The Office for National Statistics is due to publish the first estimate of third quarter growth on Oct. 25.

The BCC said its survey of 7,400 businesses showed strengthening activity in both manufacturing and services in the third quarter, with manufacturers in particular enjoying a growth spurt. Gauges of employment levels, employment intentions and confidence in future revenue at manufacturing firms hit new highs, the BCC said.

"It's clear that the U.K. upturn is gathering momentum," said David Kern, BCC chief economist.

The survey adds to a growing body of evidence showing the U.K. is experiencing a period of robust growth after several years of near-stagnation. Polls show consumer and business confidence is rapidly improving and spending and output are rising.

The survey did highlight some areas of economic weakness, however. The BCC found businesses still aren't investing in new plant and machinery even though many reported they are operating at close to full capacity. Many firms also said higher raw material costs are putting them under mounting pressure to raise prices.

Mr. Kern said the weakness of investment is likely to reflect lingering nervousness about the durability of the recovery, as well as some firms' ongoing difficulties accessing finance.

"These strong results must not lull us into a false sense of security," he said, adding the recovery remains fragile and could be knocked off course by events overseas, including the chance that a budget standoff between lawmakers in the U.S. undermines growth.

The Bank of England has pledged to keep its benchmark interest rate at 0.5% until the unemployment rate in Britain dips to 7% from its current level of 7.7%, a threshold officials believe could take up to three more years to cross.

The BCC said low rates should help support the economy. It called on the government to boost growth by cutting red tape and business taxes and investing in new infrastructure.

Write to Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

October 07, 2013 19:15 ET (23:15 GMT)