A BIGGER than expected surge in investment at the start of 2014 has offered more signs of progress in re-balancing the UK economy.

The Office for National Statistics (ONS) said investment rose by 5 per cent, or £1.6 billion, on the previous quarter to £33.4 billion in the first three months of the year, meaning five consecutive periods of growth for the first time since 1998.

The improvement, which indicates that the UK is becoming less reliant on consumer spending, was responsible for half of the overall first-quarter GDP rate of 0.8 per cent. This figure was left unchanged on earlier estimates as better construction output was offset by a downgrade in the services sector.

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The annual quarter-on-quarter growth rate was slightly lower than expected at 3 per cent but means GDP is now only 0.6 per cent below its pre-crisis level.

Treasury Chief Secretary Danny Alexander said: "Business investment tends to lag behind other indicators of recovery, so it's pleasing to see strong business investment growth of 10 per cent over the year."

Spending was up 0.5 per cent in the quarter and was achieved without requiring households to put aside a smaller proportion of their incomes as the ONS said the savings rate rose slightly to 4.9 per cent from 4.8 per cent in the fourth quarter.

The current account deficit, which shows the UK's trade in goods and services as well as income and current transfers, narrowed from the fourth quarter's £23.5 billion but it was still £18.5 billion, equal to some 4.4 per cent of GDP.

The weakness reflects a fall in income from UK assets overseas, compared with foreign-owned assets in the UK, in the wake of the recent strengthening in sterling.

Samuel Tombs, an economist at Capital Economics, said there were reasons to expect the deficit will narrow in the years to come.

He said: "Much of the weakness has reflected poor returns of the UK's overseas direct investments, which are concentrated in the eurozone. Now the eurozone is out of recession, these earnings should slowly recover."