According to a new report by accountancy organisation BDO, business confidence is improving but growth remains elusive.

BDO’s Optimism Index, which predicts business performance two quarters ahead, increased by 1.7 points following a 21-year low in January.

At 90.6 in February it remains well below the 95.0 mark, which indicates growth, as it has been since May 2012.

However, a sharp increase in the BDO Inflation Index - from 100.4 in January to 101.5 in February, its highest level since September last year – points to further pressure on bottom lines.

Peter Hemington, partner at BDO LLP, commented: “The Government needs to take action to ensure that funding goes to where it is most needed - to British business and the housing market. 

“Not only has the UK got the most consolidated banking market in the G7, it also has the smallest corporate bond market. 

“Action needs to be taken both to address these issues and to help the banks to accelerate economic recovery.”