British companies are optimistic about their growth prospects in China this year, according to a business climate survey released by the China-Britain Business Council and the British Chamber of Commerce in China on Friday.

The survey, answered by 170 British businesses, showed that 80 percent of businesses expect revenue growth this year, while 56 percent reported profitable or highly profitable performance last year.

CBBC Chief Executive Stephen Phillips said that the outlook for British businesses in China this year is the "most encouraging" in the six years he has been in his current role.

"If there are still companies who haven't considered the China opportunity then this should be a wake-up call," he said. "Whilst trading with China is not going to suit all UK businesses, they should have at least considered it."

In the survey, 83 percent of respondents said they plan to increase investment in their Chinese operations this year, while 57 percent expect to increase employment of local staff in China.

However, British companies said they continue to face challenges including rising labor costs, increasing local competition and intellectual property rights enforcement in China.

According to the survey, 84 percent of companies stated that the protection of intellectual property rights is important.

But only 22 percent of respondents said that intellectual property rights issues have damaged their operations in China.

On measures to safeguard intellectual property rights, 65 percent of respondents said they had used registered patents or trademarks in China, 32 percent use non-disclosure agreements, and 18 percent withhold key technology from the marketplace.

With labor costs rising in China, 45 percent of respondents experienced issues in attracting skilled workers and 43 percent experienced difficulties retaining skilled workers.

Despite these challenges, British companies said that they have many competitive advantages in China, including product quality and design (81 percent of correspondents), overall management expertise (78 percent) and customer service (75 percent).

But they also acknowledged that the performance of domestic competitors has improved, with the most improved areas last year being marketing, branding and competitive pricing.

The survey was conducted in January and February, and the majority of respondents were small and medium-sized businesses.