FSA warns of potential economic situations

11^th March 2010 at 19:00

The Financial Services Authority (FSA) has warned of a number of potential situations that companies should look out for in terms of the UK's economic outlook.

Its worst case scenario, explained in the FSA's Financial Risk Outlook, saw weak UK economic growth not keeping up with the recovery in the worldwide economy.

In terms of what this would mean for firms with FSA authorisation and other companies, the regulatory explained that they would have to deal with higher interest rates and a weak recovery, which would "crystallise losses on household and corporate loans".

It also noted that losses would be "magnified" by dropping asset prices, while profitability would be "further squeezed by higher funding costs".

The FSA also recommended that firms consider the eventuality of a faltering global economic recovery, which would in turn trigger slower UK economic growth.

One concerning sign emerged from the country's economy recently when the value of the UK's exports unexpectedly declined in the first month of the year, according to the Office for National Statistics.

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