The Confederation of British Industry (CBI) business lobby group has upgraded its forecast for the UK’s economic growth plan, expecting the economy to expand by 2.7 per cent this year.

The lobby group has revised its expectations up from 2.5 per cent due to a fall in inflation and oil prices, and an increase in employment.

The CBI said the rate of wages is beginning to pick up, which, coupled with low inflation, is set to give a boost to household incomes and to improve living standards.

For companies, lower energy prices are beginning to feed through to operation costs, the lobby group said, leaving “more space” for investment.

But “political volatility” both at home and abroad from countries such as Greece and the Ukraine is having an effect on exporters, causing net trade unlikely to provide any boost to the economy over the next two years.

GDP is expected to continue on a steady upwards trend throughout the rest of the year however, rising by 0.7 per cent each quarter. Business investment is also cited as a boost to GDP over the course of 2015, rising by 5.8 per cent this year and a projected 6.5 per cent next year.

Oil prices will remain low, which is in turn expected to keep consumer price inflation low.

The UK unemployment rate is expected to keep on a downward trend this year and into next year, levelling off at a rate of 5.2 per cent. In turn, wage growth is expected to hit 3.0 per cent by the final quarter of 2016.

Katja Hall, deputy director-general of the CBI, said: “UK growth continues to outshine its counterparts in Europe and progress is ‘steady as she goes’.

“While lower oil prices are keeping costs down for businesses and consumers, the North Sea oil companies are suffering, harming jobs and investment in the industry.

“Now is not the time for complacency, but falling unemployment coupled with improving wage growth and rock bottom inflation should mean that people see more money in their pockets.