Davies said: “We can expect, I believe, a continued period of low inflation and perhaps a slow recovery. In those circumstances, it will be important for companies to be realistic and not to build plans for the future on the expectation of double digit growth in revenues”
“For individuals there is the same need for realism in both borrowing and investment decisions. At the FSA we have been concerned for some time that house prices in London and the South East are as high in relation to the rest of the country as they have ever been. And the multiples of salary at which many people have been prepared to borrow continue to rise.”
However, Davies said that the future did look positive as the economic foundations remain strong. Davies said: “... in spite of everything, I am not pessimistic. The British economy is in much better shape than it was in the early 1990s and our banking sector is strong and well capitalised an important national asset in difficult times. So I forecast a challenging twelve months ahead, but not worse than that.”
