4000 UK financial services companies are at risk of failure as a result of the pandemic, with the payments and e-money sector having the lowest proportion of profitable firms.

These are predominantly small and medium sized firms and approximately 30 per cent have the potential to cause harm in failure, a FCA financial resilience survey has found.

The authority today published the results of its COVID-19 financial resilience research, which collected data from across 23,000 solo-regulated financial services firms.

The research monitored the real-time impact the pandemic is having on the finance of the firms.

“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,” said Sheldon Mills, executive director of consumers and competition. “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."

He added: “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 research demonstrates that between February and May/June, firms across sectors experienced significant change in their total amount of liquidity, defined as cash, committed facilities, and other high-quality liquid assets.

Three sectors saw a decrease in available liquidity, with Payments & E-Money experiencing a drop of 11 per cent.

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