Britain still faces a period of economic uncertainty as the eurozone crisis continues to cast a dark shadow over the country's recovery, the Bank of England has said.
If the single currency area cannot find a solution to Greece's debt troubles and the country defaults, the shockwave through Europe will find Britain unprepared, the bank governor warned.
"I don't think anybody can be fully prepared for the unforeseeable consequences if such an event were to occur," Sir Mervyn King said.
Economic figures from the euro area show its output contracted by 0.3 percent in the last quarter of 2011, fuelling fears that it will fall into a full recession.
The bank published its Quarterly Inflation Report on 15 February, which details the bank's interest rate-setting Monetary Policy Committee's view on Britain's economic outlook.
"GDP growth is likely to remain weak in the near term, before gradually strengthening as households' real incomes recover, supported by continued stimulus from monetary policy," said the report.
"But the weak external environment, tight credit conditions and continuing fiscal consolidation are all likely to act as brakes on growth.
"The outlook for growth remains unusually uncertain. The most significant threat to the domestic recovery stems from developments in the euro area, where there remain concerns about the indebtedness and competitiveness of some member countries."
Latest GDP figures for the UK show the economy contracted 0.2 percent in the final three months of 2011, adding to fears that the country will experience a double-dip recession.
Unemployment continues to rise, though inflation is falling sharply.
Recently the bank announced a £50bn increase in its quantitative easing (QE) programme, which sees it create money to buy up assets in a bid to improve market liquidity.
This takes the cost of its QE programme to £325bn.
"With so much on-going uncertainty emanating from eurozone growth and debt levels, we still see the bias skewed towards further stimulus this year," Richard Driver, currency analyst for Caxton FX, said.
"We are betting on more QE in May but the situation is highly fluid.
"It is eminently clear from King's press conference that he is scared stiff by negative developments on the continent."