Private equity house 3i today returned to profit after “one of the most challenging periods in the group's history” but warned the economy remains in the mire.

It made first-half profits of £81 million having crashed to a loss of £2.15 billion last year.

The value of its assets rose 2.5% in the six-month period.

The firm — the UK's oldest private equity group — invested £190 million in the six months to the end of September and made sales worth £507 million. Chief executive Michael Queen, who replaced Philip Yea in January and has slashed 3i's debts from £1.9 billion in March to £854 million today with the help of a £732 million rights issue, said 3i now has the firepower to take advantage of the upturn.

But he added: “I had hoped to be reporting clear evidence of an upturn. Unfortunately at this stage we are only seeing clear signs of recovery in India and China.

“There are mixed signals from the US. And Europe remains challenged. Recent stock market rallies do not seem to reflect the real economy and, as a result, we remain cautious.”