In a report out yesterday the regulator said 4,000 firms were in danger of going out of business because of COVID damage.

While many were tuned into events unravelling in the US Congress, yesterday the Financial Conduct Authority released its first resilience assessment of how well financial firms are dealing with the pandemic, particularly managing cash and other quality liquid assets. The regulator said several thousand firms are at risk.

The survey sent to 23,000 solo-regulated firms, and supplemented by other data tracked by the watchdog, showed that between February and May/June last year, six out of 10 firms said they expected the virus to negatively impact income, and three-quarters of those forecast a drop of up to 25 per cent in the three months following the survey.

“At end of October, we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure,” Sheldon Mills, executive director of consumers and competition, said. “A market downturn driven by the pandemic risks significant numbers of firms failing," he said.

The FCA has identified small and medium-sized firms as those most at risk, with around a third marked for potential failure and causing consumers harm. 'We are in an unprecedented and rapidly evolving situation,” Mills said.

A year of lockdowns and uncertainty has been good for the bottomline of some in the sector and distressing for others.

Between the two periods, firms in retail investing, retail lending and wholesale all saw incomes rise. But liquidity in the insurance sector dropped by 30 per cent, and by 11 per cent for payments and e-money and 2 per cent for investment management.

"Our role isn’t to prevent firms failing, but where they do, we work to ensure this happens in an orderly way,” Mills said. "By getting early visibility of potential financial distress in firms, we can intervene faster so that risks are managed and consumers are adequately protected,” he added.

Results showed that e-payments had the lowest proportion of profitable firms, followed by wholesale, investment management, insurance, retail lending and retail Investments.They also showed that retail lending, proportionally, made the most use of available government support, with half the firms in that sector furloughing staff and a third reporting that they had received government-backed loans.

Investment management was the least in line for government support, as you might expect, nevertheless 8 per cent of investment/wealth management firms reported using the furlough scheme and 3 per cent of receiving emergency support loans.

The survey doesn't paint a full picture of UK resilience as it did not include the 1,500 largest firms in the sector covered by the Bank of England’s Prudential Regulation Authority. It was also conducted before the government’s furlough scheme was extended and more positive news on the vaccine emerged.

That said, the FCA said it hadn't started the new year on the footing it had hoped, and more pain is likely for smaller firms. The FCA said it will repeat the survey as the situation evolves.