LONDON (UK) – The Financial Conduct Authority said on Thursday that close to 4,000 financial firms in Britain are at “heightened risk” of collapsing because of the fallout from the first wave of the pandemic.
The watchdog undertook a survey of 23,000 financial firms to gauge their resilience to the pandemic, which triggered the nation’s worst economic downturn in three centuries last year.
“At end of October we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
“These are predominantly small and medium sized firms and approximately 30% have the potential to cause harm in failure.”
The watchdog came under fire over its alleged “deficient” handling of the collapse of the London Capital & Finance investment fund in 2019, and it is also under pressure to avoid delays in mitigating harm to investors from other struggling firms.
According to the survey, insurance intermediaries and brokers, payments and electronic money, and investment management firms registered a drop in liquid assets such as cash that is needed to bolster their defences in a downturn.
But the FCA urged caution in interpreting the survey’s results.
“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 watchdog said.
