Improved North Sea oil and gas production helped the UK economy grow in the three months to July, but the strength of the pound remained a drag on exporters, according to a survey.
The CBI’s latest growth indicator comes days after official figures showed growth bounced back in the second quarter with a reading of 0.7% after a slow start to 2015.
Gross domestic product (GDP) figures from the Office for National Statistics (ONS) on Tuesday showed growth had improved from 0.4% in the first quarter to 0.7% in the April-June period.
Budget tax breaks to support the industry helped North Sea oil and gas improve production.
A balance of firms reporting growth in the past three months minus those seeing declines gave a reading of plus 20%, up from plus 14% in June.
The rebound was largely due to a faster pace of growth in the business and professional services sector, said the CBI, while expansion for manufacturers and retailers was moderate.
Growth is expected to strengthen further in the coming three months, with a balance of 27%, according to the poll of 736 businesses.
Anna Leach, CBI head of economic analysis, said: “A healthy pace of growth puts the economy on a firm footing going into the third quarter and it looks set to stay that way through the rest of this year, as low oil prices and inflation help support spending.
“Business and professional services helped lift the economy in the previous three months as they bounced back from a temporary blip last month.
“But the strength in sterling continues to cause headaches for exporters trying to sell inside the eurozone.”
Manufacturing shrank by 0.3%, its worst performance since 2013, and the construction industry was also flat. Economists said that stripping out the volatile impact of oil and gas, underlying GDP growth was just 0.5%.
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