Companies are holding back from investment because of concerns over 'ineffective' government policy and how much longer the recession will last, according to a survey of business chiefs.

The Institute of Directors (IoD) polled more than 1,200 members on the impact of the recession on their businesses, revealing that more than half (52%) are expecting GDP to be lower for 2012 than last year, with 65% said there is little to no possibility of the UK coming out from the slump before the end of December.

The lack of confidence in the growth of the economy is having a knock-on effect, with 44% admitting to postponing at least one investment or employment decision this year as a result of the uncertain economic conditions.

When questioned on the effectiveness of the coalition government's reform strategy, 69% considered its attempts to simplify tax complexity has so far failed to achieve its intention, while 68% also found political leaders efforts to reduce business regulation to be lacking.

Graeme Leach, chief economist at the IoD, said: 'Business is battening down the hatches in the expectation that the recession will continue for the rest of the year. That is bad news for the economy at large, because decisions to invest money or take on more staff are being postponed until things look up. Low confidence leads to delayed decisions, and delayed decisions further undermine economic confidence - it's a vicious cycle.

'At the same time, the government's reform agenda is pointing in broadly the right direction, but the overwhelming opinion of our members is that they are doing too little, too slowly.'

Office of Tax Simplification (OTS) tax director John Whiting however, says the business leaders are impatient. 'One has to bear in mind that the system is very complex and we have only just started. A typical example would be the bringing together of PAYE and National Insurance, the government is working on that but it does take time. I accept that we need to keep up the pressure, but that's why the OTS is there, give us time.'