The Bank’s Financial Policy Committee, headed by Andrew Bailey, the Governor, particularly singled out France.

It said: “Policy uncertainty could increase existing sovereign debt pressures and interact with pressures on public sector debt levels in major economies, geopolitical risks and risks associated with global fragmentation.

“These factors and their potential interaction make the economic outlook less certain and could lead to market volatility, including in sovereign debt markets, as already observed in response to the unexpected news of the French parliamentary elections over the summer.”

The Bank said that Britain’s financial system appeared well prepared to handle any shocks, but warned there were growing risks in other parts of the financial system.

This included US stock markets, where prices have reached levels last hit just before the dotcom bubble burst, and the private equity industry, which has been an increasingly important source of funding for British businesses. Either could be hit hard by a shock to financial markets.

Private equity-backed companies account for 10pc of all employment in the UK – more than 2m people – and the industry has grown from $2 trillion (£1.6 trillion) of assets under management to $8 trillion over the past decade.

But the Bank said that despite this growth, the sector’s finances often appeared opaque with multiple levels of debt, making the industry and the businesses it runs vulnerable to higher borrowing costs.

The Financial Stability Report said: “The widespread use of leverage within private equity firms and their portfolio companies makes them particularly exposed to tighter financing conditions.” 

There are also concerns in the housing market.

Around 3m British households are still on low-rate mortgages of below 3pc, many of which were fixed before interest rates surged. Almost all of those will move on to higher rates by the end of 2026, and can typically expect to pay an extra £180 per month each.

However, as the Bank of England is expected to start cutting interest rates in the coming months, the 18pc of borrowers with floating rate loans will start to feel the benefit.

Officials expect around 1.5m such households to see a cut to their rates this year, rising to almost two million by the end of 2026.

Debt interest burdens are rising, but are well below levels seen in crises of previous decades.

The average household can expect to pay more than 8pc of its income on mortgage repayments, up from a low of around 6pc in the pandemic. However this lower than the more than 10pc paid in the financial crisis, or the roughly 9pc suffered in the early 1990s.