ECONOMIC prospects for the second quarter have improved markedly, according to a leading business survey to be published this week. The pick-up in growth is likely to dampen hopes of more interest-rate cuts by the Bank of England’s monetary policy committee, which left base rate unchanged at 4.5% last week for the eighth successive month.

The quarterly trend survey by the British Chambers of Commerce (BCC) is expected to reveal that business has shrugged off its winter weaknesses. The upturn applies to both services and manufacturing, which recent official figures had suggested were still in the doldrums.

The survey of 5,000 firms — 3,500 in services and 1,500 in manufacturing — will show a particularly encouraging recovery in export optimism and orders, on the back of a strong global economy and faster growth in Europe. But it also shows strength in the domestic economy, with orders up. “There is no denying this is good news, though some of the recovery is from a low base,” said a BCC source. The survey is closely watched by the Bank.

It will be taken as evidence that the economy is back on a recovery track after a weak 2005. It also points to some recovery in job prospects. Significantly, the BCC did not criticise the Bank for not cutting interest rates last week.

Hopes of lower interest rates have faded with evidence of a strong pick-up in the housing market, with the Halifax (0.9%) and Nationwide (1.1%) reporting price rises last month. The Office of the Deputy Prime Minister will publish its house price index tomorrow.

In addition, the pound has weakened since American interest rates rose above those in Britain. And with the prospect of further rate hikes in Europe, sterling dropped last week to its lowest level against the euro for more than a year.

Despite this, economists have not abandoned hope of further UK interest-rate cuts. A survey by Ideaglobal.com puts a 60% probability on the next move, in November, being down.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive