Britain's economy has improved further over the past three months with companies' optimism recovering after a downwards blip at the end of the first half, the Institute of Directors (IoD) say in a document to be published today. Its latest business opinion survey for September found perceptions about company performance improved further from an already strong base, order books strengthened and employment and output growth accelerated, as did profits. Pay awards averaged 4.1 per cent, up from 4 per cent in June but still down on March's 4.4 per cent.

"Our latest survey lends yet further evidence that the economy is growing well and manufacturing industry appears to be over the worst despite the persistence of the strong pound," the IoD's head of policy, Ruth Lea, said. While the inflation picture remained benign, a tight labour market, warm housing market and firmer commodity prices "all warn against complacency", she said. Thus, "we believe there is a good chance of another increase in interest rates before the end of the year, with further rises next year".