Nearly 4,000 financial firms in UK could fail due to COVID: Regulator
Canary Wharf business district in London, the UK (File photo)
Nearly 4,000 financial companies in the UK are facing “heightened risk” of collapsing because of the coronavirus pandemic and its fallout, according to the Financial Conduct Authority (FCA).
The FCA has surveyed 23,000 financial firms to find out about their resilience to COVID-19, which caused the worst economic downturn the UK has had in 300 years.
The surveys, which are one of the data sources used to monitor financial resilience, assess the real-time effect the pandemic is having on the finances of the firms the FCA prudentially regulates.
The results of the surveys indicate firms experienced a dramatic change in their total amount of liquidity between February, when no lockdown was yet imposed and May/June, during which the first lockdown was in place.
“We are in an unprecedented – and rapidly evolving – situation,” Sheldon Mills, the FCA’s executive director of consumers and competition, said on Thursday, adding, “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,” noted Mills.
“These are predominantly small and medium sized firms and approximately 30% have the potential to cause harm in failure.”
Fifty-nine percent of respondents said that they had expected the pandemic to negatively impact upon their businesses.
So far, more than 2,836,800 people have been infected with the virus in the UK and over 77,300 have died.
On Wednesday, a record 62,322 new Covid-19 infections were registered an increase from Tuesday’s 60,916 cases.
In addition, 1,041 coronavirus-related deaths were reported on the same day.
Prime Minister Boris Johnson dashed hopes of a timely end to England’s lockdown by saying the latest tough restrictions will not be removed with a “big bang” but instead there will be a “gradual unwrapping”.
The PM told the House of Commons on Wednesday that the legislation in relation to the current lockdown, which he ordered on January 04, runs until March 31 in order to allow a “controlled” easing of restrictions back into local tiers.
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