THERE are still major challenges to be met before the UK's economic recovery is restored to a sustainable footing, the new president of the Confederation of British Industry (CBI) has warned.

Sir Michael Rake acknowledged key economic surveys have indicated that recovery is now starting to take place.

But, speaking before his first major speech as CBI president at the group's annual Scotland dinner in Glasgow last night, he said the "nascent" recovery was slow and requires business investment to increase before it gets into full swing.

Sir Michael said: "We still have big issues to address that could impact the medium longer term - energy policy, education, skills, fitness for work, infrastructure. All of these areas which are very important have to be done in a way that allows the recovery to continue. I think if we start to see more of a business-led as opposed to a consumer-led recovery with people investing that will lay the groundwork for a sustainable recovery."

Sir Michael, who is also the chairman of communications giant BT, said the return to growth in the UK also hinges on economy elsewhere in the world.

Stating that recovery here depends on the fortunes of the US, China and the Middle East, he said the "billion dollar question" is the effect on the economy when quantitative easing comes to an end and interest rates start to rise again.

He also noted his belief that new Bank of England governor Mark Carney was right to issue forward guidance on the UK base rate - in spite of fresh pressure for rates to rise. Sir Michael said: "The billion dollar question is what happens when quantitiave easing eases off and interest rates start to go up, and what impact that will have on the recovery given that we have now had four, five years of the lowest rates in real terms in history.

"I think the Fed [Federal Reserve] was right to warn it won't last forever, otherwise we get inflation and into another spiral we don't want to be in. I think the governor of the Bank of England was right to try to input into the market a recognition that in the sterling zone we are way off the need for higher interest rates, even though there are some inflationary pressures. It was a very practical move to try and calm the markets."

On the job market, Sir Michael responded to figures this week from the Office for National Statistics that showed one in three households in Glasgow has no one in work, by saying there are jobs for those who want them.

He noted that it was a politically inconvenient fact that businesses in most UK cities could not have coped without labour from continental Europe in recent years, and expressed concern that schools and universities are not producing enough people with the "right skills and attitudes for work".

Sir Michael said: "We clearly have far too many people going to university studying the wrong subjects and not enough people in apprenticeships, which are now being built strongly.

"I think you see many large companies now trying to work down their supply chains with apprenticeships, because those are real jobs that give you the skills you need the attitude to work that is so important. I was the first chairman of the Commission for Employment and Skills and I think Scotland on the whole has had a better education system in the UK. But nonetheless you have not been able to reach the productivity the north east of England has with much lower academic attainments." Outgoing CBI Scotland chairman Nosheena Mobarik reiterated concerns raised by Sir Michael on Scottish independence by calling on the Scottish Government to provide credible answers to the 200-plus questions the business group has put to First Minister Alex Salmond.

Ms Mobarik, who steps down from her CBI role at the start of next month, said ministers must answer questions on issues such as fiscal strategy, duties, taxation and business rates to allow voters to make an informed decision in time for the referendum.

In remarks issued ahead of her speech to the CBI dinner in Glasgow last night, Ms Mobarik said: "We, and others, have been advised by the Scottish Government that the answers to our questions will be set out in the white paper due to be published this autumn.

"The white paper will be the Scottish Government's prospectus on which the referendum question will be predicated, and we trust that it will provide complete, comprehensive and credible answers to our many questions. This is essential for business and we look forward to the white paper's publication."