The FSA has agreed to correct any regulatory oversights by stepping up enforcement actions.
The report found that some poultry processors are still failing to follow some of the EU's safety and quality standards.
It was issued by inspectors from the European Commission's health and consumer protection directorate as a follow up to previous surveys of the use of water retention agents in the UK.
The UK was part of a larger study by the European Commission into the labelling of water retention agents in chilled and frozen poultry meat and frozen poultry preparations by the bloc's processors. The UK was one of the main member states included in the series of studies. The others are due to be published soon.
Fresh poultry meat treated with water retention agents is prohibited under the EU's regulations. Legislation covering meat preparations and processed meat products does not exclude the use of such agents, although labelling provisions apply.
However information relating to water retention agents is not required if the poultry is supplied to food companies for further processing. Companies also do not have to label the source species for some water retention agents.
"The system in place has not prevented the placing on the market of incorrectly described poultry meat preparations as shown by the 2003 enforcement exercise," the inspectors stated. "In addition, during this mission, labelling shortcomings were seen that should have already been instigated the imposition of corrective measures by the LFAs (local food authorities)."
The inspectors called on the FSA to ensure that inspections of food plants were adequately carried out by the local food authorities. It also called on the FSA to ensure EU provisions were being implemented in the UK by increasing inspections to plants producing poultry meat and preparations.
In response the FSA said it would adopt a more coordinated programme for the official control of foodstuffs. The FSA oversees inspections of food processing plants. Local food authorities actually carry out the inspections. The FSA said it would also review the use of frozen salted poultry for producing meat preparations.
The inspectors found that the FSA has still not issued approved codes of good practice for the use of water retention agents by the UK's industry. It also found that in each of the poultry processors visited, all had at least one ingredient in their recipes listed simply as "flavouring". The source species was not identified.
In one of the plants visited, inspectors observed salted frozen meat cuts that had been thawed, then had water injected into them and were later refrozen. Meat can only be frozen once under EU law.
The FSA said it would review the prohibition on re-freezing with industry and inform the Commission of the outcome of the consultation. The FSA noted that the practice is widespread throughout the EU.
The inspectors also found problems in labelling ingredients for some meat preparations. For example one firm sends its meat preparations to a supermarket chain for on-site cooking, without identifying the list of ingredients on its labelling.
Another placed frozen chicken breasts with added water on the market without identifying as required the anti-oxidants and stabilisers used in the product. One firm also incorrectly listed its product as "Chicken breast fillet" after injecting it with water to a 20 per cent level.
At one plant the inspectors found that frozen poultry imported from the Netherlands and labelled as containing 60 per cent meat content, did not list the use of water retention agents other than phosphates and salt.
"However, such low meat content raises suspicions that for technological reasons the product would also need to have had hydrolysed proteins included in it," the report stated.
While hygiene was not covered in the inspections, the Commission team noted that in one plant workers were not wearing face masks, as required.
The new study found that out of 369 companies producing meat preparations in the UK, only one uses mixes containing hydrolysed proteins in poultry meat preparations.
The inspectors did not find any manufacturer of water retention materials in the UK. However a number of firms were found to be importing such ingredients, mainly polyphosphates, to use in ready-to-use mixtures, marinades and other products for use in poultry meat processing.
An inspection of the plant found that the poultry ingredients supplier was following the law and had good quality standards in place.
The inspections are a follow up to EU surveys in 2000 and 2001 of the UK and Ireland that found high levels of water and hydrolysed proteins in poultry meat sold in their markets. Most of the poultry products were from other member states.
In one case a poultry product was found to contain only 54 per cent poultry meat although it was sold and labelled as containing 80 per cent meat. The previous surveys also found the hydrolysed proteins were being used as water retention agents in the poultry. Some of the proteins were of non-poultry origin.
A further study by the FSA in 2003 found that 15 out of 25 samples claimed to have between five and 25 per cent more meat than was actually present. Of the samples, 18 used the description "chicken breast" or "fillet" when processors were only allowed to used the terms for chicken with no added ingredients.
The survey found that 11 samples contained non-chicken ingredients and were labelled as Halal. The findings resulted in cautions, formal warnings and one prosecution.
A large majority of incorrectly labelled products originated from other EU member states.