(Bloomberg) -- Britain's market watchdog warned about 4,000 small financial firms are at greater risk of failure from the coronavirus as the country endures a third lockdown.
The Financial Conduct Authority said Thursday that the pandemic is pushing the firms to the brink by depleting their liquidity. The survey of 23,000 businesses was carried out between June and August, before the government extended its furlough programs and rolled out vaccinations, and the regulator said it will continue to monitor the pressure on companies.
“Our role isn't to prevent firms failing,” Sheldon Mills, the FCA's executive director of consumers and competition, said in a statement. “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's survey doesn't cover the 1,500 largest financial firms, which are regulated by the Bank of England's Prudential Regulation Authority.
Retail lending and payments firms face the biggest threat to their profits, the FCA said. About half of retail lenders have furloughed staff and more than a third took government-backed loans.
The regulator also said:
- About 44% of insurers and brokers furloughed staff and 19% received a loan, while 37% of retail investment firms furloughed staff and 15% took a loan
- Between February and June, liquidity increased for firms in retail investments, retail lending and wholesale financial markets. Insurance intermediaries and brokers, payments firms, and investment management firms saw liquidity fall
- 59% of respondents said they expected coronavirus to have a negative impact on their net income
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