In response to the crisis, the FCA has been monitoring the effects of the economic downturn on firms’ solvency by rapidly increasing the data it collects on firms.

The surveys, which are one of the data sources used to monitor financial resilience, have been sent to 23,000 solo-regulated firms to understand the real-time effect the pandemic is having on the finances of the firms the FCA prudentially regulates.

The FCA has also been using existing regulatory reporting data, enhanced data purchased from a third-party provider and in-depth analysis of liquidity for a number of the most significant firms.

The survey results show that between February (pre-lockdown) and May/June, firms across the sectors experienced significant change in their total amount of liquidity. This was defined as cash, committed facilities and other high-quality liquid assets.

Three sectors saw an increase in liquidity between the two reporting periods: retail investments (eight per cent), retail lending (eight per cent) and wholesale financial markets (83 per cent), the latter seeing the greatest increase. The other three sectors saw a decrease in available liquidity: insurance intermediaries & brokers (30 per cent), payments & e-money (11 per cent) and investment management (two per cent).

When asked whether they expected coronavirus to have a negative impact on their net income, 59 per cent of respondents had said that they did. Of these, 72 per cent expected the impact to be between one per cent and 25 per cent. Three per cent expected the impact to be 76 per cent+ within the next three months of the survey being taken.

Sheldon Mills, executive director of consumers and competition, said: “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. 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. These are predominantly small and medium sized firms and approximately 30 per cent have the potential to cause harm in failure.

“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.”