Post-election uncertainty, policy change and a referendum on EU membership rank as the biggest threats to UK business according to the latest Deloitte CFO Survey. The survey for Q1 2015 gauges the views of 108 CFOs of FTSE 350 and other large private UK companies.

CFOs are more concerned about the general election and the risk of an EU referendum than deflation and weakness in the Euro area, emerging market weakness and the prospect of tighter monetary policy in the UK and US.

Against a backdrop of elevated levels of political uncertainty, CFOs have become less willing to take risk. In fact, 51 per cent of CFOs say that now is a good time to take risk onto their balance sheets, down from a high of 72 per cent just two quarters previously.

Uncertainty has risen with 63 per cent of CFOs saying the level of uncertainty facing their business is above normal, high or very high. CFOs’ expectations for capital expenditure, while still positive, have dipped with a net 53 per cent of CFOs saying UK corporates will increase spending in the next 12 months, down from a high of 80 per cent in Q1 2014.

CFOs were also asked about the effect on their business of likely changes in key policy areas. A net 66 per cent say that changes to general levels of regulation are likely to be negative and 50 per cent say that changes to tax policy are likely to be negative. CFOs also say that changes to financial regulation (40 per cent), fiscal policy (31 per cent), monetary policy (25 per cent), the labour market (20 per cent) and energy policy (15 per cent) are likely to be negative.

CFOs are upbeat about changes to education and training and infrastructure policies.

Ian Stewart, chief economist at Deloitte, said: “The UK economic outlook has improved since the start of the year but for CFOs this seems to have been offset by mounting political risk.

“Rising perceptions of uncertainty have dampened corporate risk appetite and fed through to a softening of investment intentions. Risk appetite appears to have decoupled from its usual drivers, the economic outlook and equity market performance. This provides an ominous reminder that the business recovery is not assured.

“A clear majority of CFOs see the potential for adverse changes on regulation and taxation and, on balance, the expectation is that post-election changes will be negative for fiscal, monetary and labour market policies.”

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