Britain is set to avoid the feared 'triple-dip' recession, according to a new survey.
Business confidence has now strengthened to the highest level since the second quarter of 2011, the ICAEW/Grant Thornton Business Confidence Monitor (BCM) report has suggested.
The BCM survey suggests GDP will expand by 0.4% in the first quarter of the year, after the 0.3% contraction in the last quarter of 2012.
ICAEW chief executive Michael Izza said: "There was a risk that, combined with the traditional January blues, the bad weather and some high profile retail collapses, talk of a triple-dip recession could become self-fulfilling.
"These results show that we are set to avoid a third period of technical recession, but no one should be complacent.
"There is only one way out of our economic malaise, and that's to increase our economic output. Such a task isn't going to be easy, or indeed quick."
Firms have seen a 1% increase in staff in the last year and plan to increase headcount by another 1.5% over the next 12 months.
One in 10 firms say the availability of management skills is a greater challenge than a year ago, suggesting that companies may struggle to recruit the right people to lead the recovery.
However, although business confidence appears to be widespread, it is most optimistic in Wales and the South East.
The report added that the construction sector, which has been hit hard in recent reporting periods, has renewed confidence along with IT and telecommunications.
Grant Thornton LLP chief executive Scott Barnes said: "Export growth rose slightly this quarter as the global economy picked up.
"This is coupled with an improvement in both profit and turnover growth, which companies expect to increase in the year ahead.
"Despite a rise in confidence though, companies' modest plans for capital investment are a worry as this is crucial to a strong and sustained recovery."