Firms hoard cash on recession fears

The UK has been mired in recession since late 2011 and the Bank of England has warned that the lack of confidence among businesses and consumers could lead to a downward spiral.

The IoD said a poll of nearly 1,300 of its members showed that 44 per cent of top business executives had postponed at least one investment or employment decision this year due to the uncertain environment.

More than half of those said the decisions would be delayed until at least 2013.

The poll, conducted between July 26 and August 3, also showed that two-thirds of respondents saw a low chance or no chance of Britain emerging from recession this year, though a majority also expected that the economy would pick up in the second half.

“Business is battening down the hatches in the expectation that the recession will continue for the rest of the year,” IoD Chief Economist Graeme Leach said.

“Low confidence leads to delayed decisions, and delayed decisions further undermine economic confidence - it’s a vicious cycle,” he added, urging the government to take bold steps to boost confidence.

The survey showed that business leaders were highly critical of the Government’s progress on simplifying the tax system and reducing business regulation, both areas the coalition of Conservatives and Lib Dems have pledged to tackle.

With the economy in recession since the last quarter of 2011, the government has come under increased pressure to loosen its austerity drive, aimed at erasing a huge budget deficit within the next five years.