Leading business group British Chambers of Commerce has upgraded its long-term growth forecasts for the first time since before the recession in a further sign of cautious optimism over Britain’s economic recovery.

BCC said it expected output to increase by 0.9% this year, up from its previous prediction of 0.6% following better-than-expected progress at the start of the year including a strong recovery in the services sector.

It also lifted its forecast for gross domestic product (GDP) for 2014, from 1.7% to 1.9%, and 2015, from 2.2% to 2.4%.

The forecast for 2013 remains just short of the 1% growth expected by the BCC before it slashed its prediction to 0.6% earlier this.

A BCC spokeswoman said it was the first time forecasts for three years had all been increased since before the financial crisis in 2008.

But the body, which represents 104,000 business members with more than 5million employees, warned that the pace of improvement was still poor and called for measures to boost capital investment.

BCC director general John Longworth said: “The upward revision in our growth forecasts is encouraging.

“Unfortunately, this does not change the fact that economic growth is still too weak and the pace of recovery will remain unduly slow for a while yet.”

The upgrade comes after the UK avoided a feared triple-dip recession with growth of 0.3% in the first quarter.

The BCC now expects to see 0.3% improvements in the second and third quarter, with 0.4% in the last three months of the year and 0.5% per quarter during 2014.

It said while growth would remain modest until 2015, there would be a gradual medium-term improvement.

The powerhouse services sector, which represents the bulk of the economy, is likely to outperform other areas, it added.

The outlook boost comes in the wake of mixed views elsewhere. The Bank of England recently forecast growth being a little stronger, while the Organisation for Economic Cooperation and Development cut its prediction from 0.9% to 0.8% for the year.

Mr Longworth stressed that the BCC had always believed fears of a triple-dip recession were misguided and pointed to claims that GDP statistical revisions may eventually show there was not even a double dip.

However he added: “We are still a far cry from getting the economy fully back on track. The UK is, and will for some time, be performing below its potential and we can do so much better.

“But the government must step up its efforts to create the right conditions for an environment that supports enterprise, as this will help more businesses to create jobs, invest, export and ultimately, grow.”

Mr Longworth said there was plenty of scope to cut current spending and shift priorities towards capital investment while the Treasury and Bank of England could also do more to guarantee private investment in infrastructure and other capital projects.

David Kern, the BCC’s chief economist, added a note of caution, saying the UK remained under considerable pressure. He said the improvement in outlook was partly due to the revision of earlier data.

Mr Kern said the economy still faced risks from a worsening eurozone and increased inflation at home squeezing real incomes with a harmful effect on growth.