Confidence among top executives is on the wane

Confidence among senior executives at Britain's largest companies has declined in recent months despite improvements in the economic and trading environment, a report from accountant Deloitte warns today.

The sentiment was not, however, held by businesses in the wider market, according to a rival survey, which found optimism had risen in March.

Deloitte's survey of chief financial officers at Britain's largest 250 companies reveals that businesses believe that there is a one-in-three chance of the economy sliding back into recession, as well as widespread anxiety that a hung parliament following the election could damage a sustained economic recovery. It found 93 per cent think a hung parliament would be bad news for the economy. A third warn it would be "significantly negative".

Four-in-five of the executives said they expected the recovery to be sluggish, while warning that there was a 33 per cent chance of further quarterly declines in GDP – the so-called double-dip. The state of the country's public finances continues to be the biggest worry for many, with 85 per cent of executives saying that reducing debt should be the first priority for whichever party forms the next government.

But a survey by rival accountant BDO showed optimism was at its highest level for two years. Yet, it warned that Britain's recovery was threatened by a lack of business investment.

BDO's "Optimism Index", which is published monthly, jumped from 99.4 to 103.2 in March, a level not seen since the summer of 2006. Its output index has also reached its highest level since the third quarter of 2007, before the worst recession since the Second World War gripped Britain.

A rise in the output index, which measures short-term turnover expectations, means companies are re-stocking, providing a boost to businesses' order books. But, BDO said, while this is encouraging, growing inventory levels will provide only a temporary crutch for economic growth and cannot be seen as a firm foundation for recovery.