4,000 financial firms in Britain were at “heightened risk” of collapsing due to fallout from the first wave of the pandemic, the Financial Conduct Authority has said after a survey it sent out to its members.
The surveys, which are one of the data sources used to monitor financial resilience, have been sent to 23,000 solo-regulated firms to understand the real-time effect the pandemic is having on the finances of the firms the FCA prudentially regulates.
Sheldon Mills, Executive Director of Consumers and Competition said: ‘We are in an unprecedented – and rapidly evolving – situation. This survey is one of the ways we are continuing to monitor the potential impact of coronavirus on firms. 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. These are predominantly small and medium sized firms and approximately 30% have the potential to cause harm in failure.
‘Our role isn’t to prevent firms failing. But where they do, we work to ensure this happens in an orderly way. By getting early visibility of potential financial distress in firms we can intervene faster so that risks are managed and consumers are adequately protected.’
The FCA though did caution over its results.As this survey is one of 4 ways the FCA is monitoring firms, caution should be taken about using this data to make predictions. In addition, this survey was conducted before the extension of the government’s furlough scheme, the positive vaccine developments and the announcement of new rules and restrictions. The FCA will repeat the survey as the situation evolves.