Britain’s largest private equity firms and the banks that lend to them are to face more scrutiny from the Financial Services Authority as the City watchdog turned its gaze on the secretive deals that have helped reshape the UK’s corporate landscape.

Warning that the collapse of a large buy-out is now “inevitable” and could - in extreme circumstances - pose a threat to the economy’s stability, the FSA said it would pay regular visits to 14 large private equity firms.