FCA releases virus financial impact data
The FCA’s coronavirus financial resilience survey, released this week, provides the first systematic look at how the pandemic has altered liquidity and profitability across the UK’s regulated financial services sector.
Survey scope and methodology
During the first lockdown, the FCA sent a questionnaire to roughly 23,000 solo‑regulated firms to gauge real‑time effects on their balance sheets. It also drew on existing supervisory reports, third‑party data purchases and deep‑dive liquidity analyses of the largest institutions. This mixed‑method approach supplements three other monitoring tools used to track firm solvency.
Sheldon Mills, the FCA’s Executive Director of Consumers and Competition, warned that the market downturn “risks significant numbers of firms failing.” At the end of October, the regulator identified about 4,000 firms with low financial resilience, many of which are small or medium‑sized enterprises. Roughly 30 % of these could cause consumer harm if they collapsed.
Liquidity shifts across sectors
Comparing data from February, before lockdown, to May/June, when restrictions were strongest, the survey shows divergent liquidity trends. Retail Investments and Retail Lending each saw an 8 % rise in cash, committed facilities and other high‑quality liquid assets. Wholesale Financial Markets posted the steepest jump, with liquidity climbing 83 %.
Three sectors recorded declines: Insurance Intermediaries & Brokers fell 30 %, Payments & E‑Money dropped 11 %, and Investment Management slipped 2 %. These changes reflect shifting client behavior and varying ability of firms to tap emergency funding.
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When asked whether coronavirus would negatively affect net income, 59 % of respondents anticipated a hit. Of that group, 72 % expected losses between 1 % and 25 %, while a small 3 % foresaw a decline of more than 75 % within three months of the survey.
Profitability and government support
The Payments & E‑Money sector now has the lowest share of profitable firms, followed by Wholesale Financial Markets and Investment Management. Retail Lending experienced the biggest fall in profitability, shedding 10 percentage points between February and May/June, with Payments & E‑Money losing 9 points.
Four other sectors reported modest gains in profitable firms: Insurance Intermediaries & Brokers and Investment Management each rose 2 points, Wholesale Financial Markets added 2 points, and Retail Investments grew 1 point.
Government assistance has been uneven. Nearly half of Retail Lending firms (49 %) furloughed staff, and 36 % secured a government‑backed loan. The next most supported group, Insurance Intermediaries & Brokers, saw 44 % furlough and 19 % loan uptake. Retail Investments, Payments & E‑Money, Wholesale Financial Markets and Investment Management followed with progressively lower participation rates.
These figures suggest that firms most exposed to the crisis are also those most likely to tap public safety nets, a pattern that could shape future supervisory focus.
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From a practical standpoint, the data imply that smaller firms—especially those in retail lending and payments—may need to tighten credit terms or seek additional capital to stay afloat.
Their reliance on furlough schemes and loans indicates a thin buffer that could erode quickly if economic recovery stalls.
Regulators will keep watching for signs of distress to intervene where necessary.
Limitations and next steps
The FCA warns that the survey represents just one element of its broader monitoring framework, and the results should not be treated as definitive forecasts. The questionnaire was conducted before the extension of the furlough program, before vaccine progress, and prior to the rollout of new regulatory rules.
Because the situation continues to evolve, the authority plans to repeat the survey, updating its view of firm resilience as conditions change. Until then, supervisors aim to protect consumers while allowing market failures to proceed in an orderly fashion.
