Economic growth reached a record high in May, posting the highest reading since data began in 2003, according to the latest CBI growth indicator.

The survey of 726 respondents across the manufacturing, retail and service sectors registered record high growth in business activity, with a balance of +35%, up from +25% in April.

The CBI’s growth indicator suggests the UK economy has continued to perform strongly going into the second quarter of 2014, with the pace of growth predicted to remain firmly above average for the coming quarter as well (a balance of +30 for expected output growth for the next three months).

Growth strengthened in retail sales and business volumes for the business & professional and consumer services sectors in the three months to May, with manufacturing output continuing to grow at the same solid pace as the previous two months.

Katja Hall, CBI Deputy Director-General, said: “The UK economy is performing strongly and this is thanks to rising business and consumer confidence, better credit conditions at home and improving global economic conditions.

“What’s encouraging is that growth is becoming more broad-based, with solid increases in business investment over the past year. This bodes well for the year ahead.

“But there are risks to the UK’s outlook from global developments, including the possibility that the situation in Ukraine and Russia could impact on global commodity prices. And with the Eurozone crisis still far from being fully resolved, the UK continues to be exposed to a prolonged period of subdued activity in the region.”

While the British Chambers of Commerce (BCC) has today (Friday) upgraded its growth forecasts for the next two years – from 2.8% to 3.1% in 2014 and from 2.5% to 2.7% in 2015. For 2016, their forecast is unchanged at 2.5%.

With expected growth of 3.1% this year, it will be the first time since 2007 that annual growth has been above 3%. They continue to believe that GDP will exceed its Q1 2008 pre-recession peak in Q2 2014.

John Longworth, BCC Director General, says that although the upgrading of the forecast is ‘great news’, he warns that Britain still has a lot of work to do to ensure long-term growth prospects. The expected slowdown in growth in the next two years is a warning sign that the UK is overly reliant on consumer spending as a driver of growth. Longworth celebrates strong recent growth in business investment, but warns that it is from a low base – and that businesses need confidence from the government and the Bank of England to sustain investment into the future.