THE Scottish economy is showing clear signs of recovery but growing business confidence has yet to be translated into investment, according to research from accountancy firm PwC.

However the firm, which publishes its UK Economic Outlook today, said there was evidence of growing strength across the services, construction and manufacturing industries.

As a result it has revised its prediction for Scottish GDP growth for this year upwards from 2.4 per cent to 2.8 per cent. That is also ahead of the Fraser of Allander forecast released last month which predicted 2.4 per cent across 2014.

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Whatever the final figure is, the economy appears set to grow more quickly than the 1.6 per cent recorded for 2013.

Paul Brewer, government and public sector partner at PwC in Scotland, said there are "welcome" signs of real momentum.

However he warned there are still factors which could derail the recovery and said: "From a business perspective, while we are seeing anecdotal evidence of increasing confidence across many business sectors, this isn't necessarily feeding into the volume of investment that is needed to help balance the recovery.

"Unlike at the height of the recession, access to finance is not the key issue, with factors such as the time for investment decisions to be fulfilled and pre-referendum uncertainty more likely causes.

"We need to see a significant step up in investment if we are to really harness this economic momentum."

Scotland is also still likely to lag behind most other parts of Britain in terms of GDP growth this year.

London is predicted to be the main engine driving the recovery with 3.4 per cent growth with most other English regions expected to report three per cent or greater. In contrast only Wales (2.7 per cent), the north east of England (2.5 per cent) and Northern Ireland (2.2 per cent) will grow more slowly than Scotland.

PwC put its total UK GDP growth for 2014 at three per cent, up from 1.7 per cent in the previous year.

It said: "The services sector will remain the main engine of UK growth for both output and employment, but both manufacturing and construction are also now showing positive growth trends."

PwC highlighted potential threats to the recovery including slowing activity in the eurozone, rising energy prices, poor productivity growth and a housing bubble.

It added: "In summary, the UK recovery should remain relatively robust through 2014 and 2015, although its longer-term sustainability will depend on avoiding major global shocks and raising growth of productivity and real incomes." The research also forecast Scottish house prices could rise by five per cent this year to give an average of around £198,000.

There is an expectation prices will continue to rise steadily and reach around £225,000 by the end of the decade.

Mr Brewer played down suggestions of a Scottish housing bubble and said: "While not at the same pace as we're seeing in the south of England, it does appear that house prices in Scotland have been accelerating of late.

"However, this pace is unlikely to continue in the long term. In the period from 2016 to 2020, Scotland is forecast to experience the slowest growth of all the UK regions with the exception of London. The average rise per annum will be 2.8% compared to 2.7% in London, with the biggest rise expected to take place in the East Midlands and Northern Ireland.

"Affordability could continue to be an issue for many first-time buyers. It will be interesting to see how home ownership funding initiatives by Scottish Government and the two-year 'notice period' leading to the end of the 'right to buy' scheme will impact this over the next few years."