In response to the crisis, the FCA has been monitoring the effects of the economic downturn on companies’ solvency by rapidly increasing the data it collects on companies. The surveys, which are one of the data sources used to monitor financial resilience, have been sent to 23,000 solo-regulated companies to understand the real-time effect the pandemic is having on the finances of the companies 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 several significant companies.
The survey results show that between February (pre-lockdown) 2020 and May/June (during the impact of the first lockdown) 2020, companies 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 2 reporting periods: Retail Investments (8%), Retail Lending (8%), and Wholesale Financial Markets (83%), the latter seeing the greatest increase. The other 3 sectors saw a decrease in available liquidity: Insurance Intermediaries & Brokers (30%), Payments & E-Money (11%), and Investment Management (2%).
When asked whether they expected coronavirus to have a negative impact on their net income, 59% of respondents had said that they did. Of these, 72% expected the impact to be between 1% and 25%. 3% expected the impact to be 76%+ within the next 3 months of the survey being taken.
The Payments & E-money sector has the lowest proportion of profitable companies, followed by Wholesale Financial Markets, Investment Management, Insurance Intermediaries & Brokers, Retail Lending, and Retail Investments. For the companies that responded to this question the greatest decrease in profitable companies between February 2020 and May/June 2020 was seen in the Retail Lending sector (10%) followed by Payments & E-Money (9%). The other 4 sectors saw a small increase in profitable companies between February 2020 and May/June 2020 as follows: Insurance Intermediaries & Brokers (2%), Investment Management (2%), Wholesale Financial Markets (2%) and Retail Investments (1%).
Proportionately, Retail Lending had made most use of the available government support (49% of Retail Lending companies had furloughed staff and 36% had received a government backed loan), followed by Insurance Intermediaries & Brokers (44% had furloughed staff and 19% had received a loan), Retail Investments (37% had furloughed staff and 15% had received a loan), Payments & E-Money (36% had furloughed staff and 11% had received a loan), Wholesale Financial Markets (16% had furloughed staff and 11% had received a loan), and finally Investment Management (8% had furloughed staff and 3% had received a loan).
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