Business confidence has grown to its best level for nine years following a significant upturn in orders, according to a new report yesterday.
A survey of 2,200 firms showed that one in four saw sales rise in recent months, a jump from fewer than one in ten six months ago.
The report, from Lloyds TSB Corporate Markets, revealed that over a third of companies enjoyed stronger profits through the early summer.
Despite increased fuel and commodity costs, firms said they had maintained prices by harnessing greater operating efficiencies.
Almost one in five had increased prices, rather than cut them, in the first half of the year.
Diana Brightmore-Armour, corporate banking director at Lloyds TSB Corporate Markets, said: "The rise in raw material costs and fuel prices has been offset by a resurgence in domestic and global demand that has allowed firms to boost sales and orders.
"The knock-on effect has been a welcome boost to confidence that has led to increased capital expenditure and recruitment."
Levels of investment and recruitment have rebounded since last year, according to the report. Across the UK, a third of firms increased capital expenditure and 27 per cent took on new staff during the first half.
Ms Brightmore-Armour added: "The export of UK services has been a particular success story in the first half of the year, with firms selling legal, accountancy, banking and brokerage services leading the charge.
"The balance of business services firms reporting an increase in sales rose 40 per cent since the start of the year - a definite shot in the arm for the UK economy - and reflects last year's £53 billion surplus on trade services and net investment income.
"This survey shows that most UK firms believe conditions will continue to be favourable, which suggests the second half of the year should see businesses thriving."