Business leaders believe the Government's attempts at economic and business reform have been ineffective, and that the UK will stay in recession at least until the end of this year.
A survey of 1,200 members of the Institute of Directors (IOD) has accused Chancellor George Osborne of failing to kick-start the economy by doing "too little, too slowly."
The directors said the coalition had struggled most at reducing tax complexity and business regulation.
Some 44% of bosses say they have put off investment or employment decisions this year due to the uncertain economic outlook – as 66% say there is little or no possibility of the recession ending in 2012.
IOD chief economist Graeme Leach 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."
However, the IOD members said the Government's reform agenda is pointing in broadly the right direction even though the perception is "too little, too slowly".
Mr Leach added: "If the coalition wants to break this cycle of low economic confidence, then they need to take some bold steps that will make a real difference to the cost and complexity of doing business in the UK."
Shadow business secretary Chuka Umunna believes business leaders no longer trust the Government.
Mr Umunna said: "Month after month the country's businesses have been telling the Government it is not doing enough to lift our economy out of this double-dip recession created in Downing Street.
"But out-of-touch and ineffective ministers refuse to listen, which is why they are losing the confidence of business."
However, a Government spokesman said: "We have set out a comprehensive strategy to achieve strong, sustainable and balanced growth, including important reforms to reduce the burden of regulation.
"Since 2011, savings to business from cuts in regulation have outweighed the costs of new domestic regulation by more than £850m, and a root and branch reform of labour laws has already led to an increase in the qualification period for unfair dismissal and reform of employment tribunals.
"The Government has clearly demonstrated a commitment to simplifying the tax system."
