A study conducted by the Financial Conduct Authority (FCA) has found that by the end of October there were 4,000 financial services firms with “low financial resilience and a heightened risk of failure”.
The data comes from the regulatory body’s Covid-19 financial resilience survey, which it sent to 23,000 solo-regulated firms across the UK to measure the impact of the pandemic on the financial stability of companies.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “A market downturn driven by the pandemic risks significant numbers of firms failing.
“At end of October we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure, though many will be able to bolster their resilience as and when economic conditions improve.”
Also revealed by the survey was a variation on the impact to firms’ total liquidity depending on the industry they belonged to.
While insurance intermediaries saw the largest decline in liquidity of 30%, total liquidity in the wholesale financial markets sector soared 83%.
Moreover, the payments and e-money sector reportedly has the lowest proportion of profitable firms, as the total number of profitable businesses in the sector fell 9% between February 2020 and June 2020.
Mills added that it is the role of the FCA to ensure when firms do fail it happens in “an orderly way”, so that both “risks are managed and consumers are adequately protected”.
