Political uncertainty around next year's election and the prospect of a referendum on Britain's membership of the EU have become the biggest risks to business, according to a survey of executives at big companies.
It showed, however, that overall concerns about economic and financial risk continued to fall. There was also further evidence that firms were becoming more confident about investing and expanding, with two-thirds of finance bosses saying now was a good time to take risks.
The quarterly poll, which includes 31 FTSE 100 companies, showed that 45% of CFOs expected interest rates to be 1% in a year's time, up from their record low of 0.5% now.
While some cited higher borrowing costs, a housing bubble and volatility in emerging markets as risks, the main concern was the political outlook.
"The macroeconomic worries that have acted as a drag on corporate activity have eased and the policy environment is more stable. But, with the general election less than a year away, uncertainties around political and policy risk have moved centre stage," said Ian Stewart, chief economist at Deloitte.
"Nonetheless, UK corporates have shifted from balance-sheet repair to growth and business spending is emerging as a driver of the UK recovery. Cost control, debt reduction and building cash helped get business through the recession but the weight CFOs attach to such defensive strategies dropped to a four-year low in the second quarter."
The large majority of CFOs expected their company's turnover to increase over the next 12 months. A net 93% – the difference between those forecasting a rise and those a fall – saw revenues rising, up from 57% this time last year.
There were also upbeat signs for the jobs market, with a net 76% of CFOs predicting that hiring would pick up.
The report is the latest in a string of upbeat surveys on the UK private sector, which have bolstered expectations in financial markets that the Bank of England will raise rates around the turn of the year.
The Bank's monetary policy committee announces its latest rate decision on Thursday, but none of the economists in a Reuters poll forecast any move yet.
"No change in monetary policy is again expected at the Bank of England, but the speed with which the economy continues to grow, and unemployment fall, has led to increasing expectations that the first hike in interest rates will take place later this year and the policy debate looks likely to have intensified," said Chris Williamson, chief economist at data specialists Markit.
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