Britain’s economy will accelerate this year as the strong global economy combines with renewed confidence in the Brexit negotiations, once more defying fears of a slowdown.

GDP should grow by 1.9pc in 2018 and repeat the feat in 2019, according to the National Institute for Economic and Social Research. That is up from previous forecasts of 1.7pc, and compares with growth of 1.8pc in 2017.

Economist Amit Kara said the UK economy is in the process of rebalancing.

“We expect the UK economy to rebalance away from domestic demand and towards net trade,” he said.

“The main reason why we revised up the forecast was partly because of the upward revisions to the global forecast, but also because the success in the Phase One agreement [of the Brexit talks] was very encouraging.

“In our view that has, to some extent, lifted the fog of uncertainty and that should encourage investment spending.”

The forecast is based on the Bank of England raising interest rates in May and then by 0.25 percentage points every six months until rates reach 2pc, and also assumes the UK retains a good deal of access to the EU’s markets.

“A bespoke deal is possible, but it will require trade offs, but it is a political judgment, and because it is a political judgment there is a great deal of uncertainty,” Mr Kara said.

Niesr expects the Government to end up paying for access to the EU’s markets, and accepting some freedom of movement.

Risks to the forecast include a surprise breakdown in talks and the use of World Trade Organisation rules for EU trade, which could cause “a mild recession” as some UK industries would be cut off from major markets.

Other hazards are, somewhat paradoxically, a rise in wages.

Brexit | Key dates

If the rise in the National Living Wage and a hike in public sector pay push up wages across the economy without any corresponding rise in productivity, then inflationary pressures could grow, forcing the Bank of England to raise interest rates, putting the brakes on GDP growth.

Meanwhile Niesr also hiked its global growth forecasts, predicting worldwide GDP growth of 3.7pc this year, up from earlier predictions of 3.5pc.

Niesr’s Garry Young said a rapid improvement in the eurozone has particularly boosted growth overall.

But there are risks to this outlook too and he expects this year to be the peak for GDP growth.

“Gradually the brakes will be applied by watchful monetary policy in the US,” he said.

“The strong euro is having an impact on the eurozone. Higher oil prices also tend to have a moderating effect on growth.”