On paper, the FS10 matches countless compact cameras we’ve seen recently: 12-megapixel sensor, 5x zoom stabilised lens, 2.7in LCD screen and 720p video mode. However, at £110 it undercuts its rivals by around £40.

Let’s get the bad news out of the way first. The screen looks OK when viewed head on but at any other angle its colours become badly skewed. We tend to hold compact cameras with our elbows pressed against our sides for stability, but doing so means viewing the screen slightly from above.

On the FS10 this caused the preview image to become washed out, not so much that it was unusable but enough to make exposure judgements impossible. We found ourselves adjusting the way we held the camera to avoid the problem. Meanwhile, viewing from below or the sides causes colours to become inverted, so this isn’t a great camera for huddling around to share photos with or for snapping over the heads of crowds.

If you can live with these limitations, the FS10 has a lot to offer. Its controls are simple and quick to use, with a dedicated button to activate the fully automatic Intelligent Auto mode plus a Quick Menu button to access the most commonly used photographic functions. It’s a fast performer, too, with responsive autofocus helping it to an average of 1.9 seconds between shots. It managed 1.6fps in continuous mode, which is superb for a camera so affordable.

Image quality is excellent for the price, too. The lens doesn’t bear the Leica logo seen on pricier Panasonic cameras but its corner-to-corner sharpness was excellent and there were barely any chromatic aberrations. Colours were balanced and natural, although highlights were often clipped in high-contrast scenes.

The digital processing had its work cut out suppressing noise at high ISO sensitivities, but while ISO 800 shots were notably lacking in colour fidelity, they still looked reasonably clean and detailed on casual inspection. The Intelligent Auto mode lived up to its name, picking the ideal settings to produce presentable shots indoors without the flash. Videos were a little noisy and the zoom was fixed while recording, but it’s great to have 720p recording at this price.

It’s frustrating that Panasonic didn’t see fit to give the FS10 a 10- or even 8-megapixel sensor, as this could have reduced noise levels and still captured more than enough detail. We currently have an odd situation where many premium compacts use 10-megapixel sensors, but if you’re on a budget it’s hard to find a camera with less than 12 megapixels. However, if we compare the FS10 with its peers, it looks extremely attractive. It’s small, reasonably handsome, easy to use and its image quality is thoroughly dependable on automatic settings. The screen stops it getting full marks, but this is the best camera we’ve seen for those on a tight budget.