LONDON (Reuters) - Britain's top business lobby upgraded its economic growth forecasts for this year and next on Monday and said it expects to see marked improvements in British business investment and productivity.

The Confederation of British Industry predicted Britain's economy will grow 3.0 per cent this year, raising its forecast from 2.6 per cent previously.

It also upped its outlook for next year to show growth of 2.7 per cent, compared with 2.5 per cent earlier.

The CBI pointed to rising business investment as companies become more confident about strength of the upturn, helping to end years of poor productivity that has perplexed policymakers.

"The recovery is advancing after a strong performance in the first quarter of 2014," said John Cridland, the CBI's director general, referring to the 0.8 per cent economic growth seen in the first three months of the year.

"I think we will see the sort of investment that will achieve organic productivity growth by boosting the productive capacity of workers through new kit, new technology, and new work organisation."

The CBI said it expects business investment growth of 8.3 per cent this year and 9.1 per cent next year.

But it warned there were risks to its outlook - chief among them political uncertainty surrounding next year's general election and the Scottish independence referendum this September.

It called on politicians to avoid making "damaging market interventions". "Politicians must be wary of the risk of headline-grabbing policies that weaken investment, opportunity and jobs," said Cridland.

The opposition Labour party has said it will stand up for voters by checking the interests of big business, and announced it would freeze electricity prices for 20 months if it wins power - a strategy dismissed as "anti-business" by the government.