Fund managers in Britain posted a 6% rise in assets under management to 10 trillion pounds ($10.8 trillion) last year, but a slowdown is likely, the Investment Association (IA) said on Tuesday.

The 2021 growth rate was below the 11% compound average annual increase seen in the last 10 years, according to an IA survey.

"Whilst 2021 was a positive year, we now face a very different operating environment," IA CEO Chris Cummings said in the report, pointing to the war in Ukraine.

"Rising interest rates bring the spectre of recession and weaken the outlook for asset growth."

Sterling fell to record lows against the dollar this week as fears mounted over the government's recently-announced fiscal plan, unleashing calls for an emergency Bank of England rate hike to restore confidence.

Assets managed within funds open to a range of investors reached 4.1 trillion pounds last year, with almost two-thirds sitting in funds registered overseas, mainly in Ireland and Luxembourg.

So far, the European Union has not materially restricted delegation, the mechanism which allows overseas asset managers to run funds based in the bloc, but the volume of business, which brings in export earnings to Britain, highlights what's at stake if EU-UK relations broke down completely over issues like post-Brexit Northern Ireland.

Nearly half of assets in the survey are now subject to environmental, social and governance criteria, and assets applying exclusions reached 28%, from 25% a year earlier.

Cummings described the growth of sustainable and responsible investing as a "standout trend".

($1 = 0.9260 pounds)

(Reporting by Carolyn Cohn and Huw Jones; Editing by Mark Potter)