Nearly four in 10 firms within the retail investments industry furloughed staff amid the coronavirus crisis, according to new data from the City watchdog, but overall firms have remained profitable.
Figures published by the Financial Conduct Authority this morning (January 7) showed 37 per cent of firms in the retail investments sector had used the government’s Job Retention Scheme, while 15 per cent had received a government-backed loan.
Retail investment firms — which include advisers, self-invested personal pension operators, platforms and wealth managers — were among the highest users of the furlough scheme within financial services.
This was despite the fact more firms in the retail investment sector were profitable in the latest surveys, conducted in the summer, than in February before the pandemic struck.
The FCA’s data shows that 87 per cent of firms within the sector reported being ‘profitable’ in the latest tranche of data, up from 85.6 per cent in February.
Only retail lending firms and insurance intermediaries used the government's Job Retention Scheme more widely than retail investment firms, with 49 per cent and 44 per cent of firms respectively furloughing staff.
Firms within payments and e-money (36 per cent), wholesale financial markets (16 per cent) and investment management (8 per cent) all used the scheme less heavily.
The FCA polled 13,000 firms in June and a further 10,000 firms in August — probing more than 5,000 retail investment firms in the process — and found just 7 per cent of retail investment firms had delayed payments, and the average liquidity of firms in the sector had actually increased from February to May/June.
In comparison, of all the firms polled 13 per cent had negotiated extensions with creditors or delayed payments amid the crisis.
The total liquidity in the sector had increased from £5.7bn to £6.1bn while the average firm held £107,100 in cash or high-quality liquid assets in June, compared to £91,700 in February.
Firms in the retail investment sector also reported that their estimated cash inflows exceeded their expected cash needs, with a 13 per cent excess of inflows on average.
The numbers were less pretty when assessing income, however. Across financial services, 59 per cent of firms said they expected the pandemic to have a negative impact on their net income.
This figure jumped to 66 per cent within the retail investment group and made the sector the second worst affected group of those polled.
The majority of retail investment firms (87 per cent) said their income was likely to drop between 1 and 25 per cent during the coronavirus crisis, while some 10 per cent thought it was likely to tumble up to 50 per cent.
A much smaller group — 2 per cent and 0.8 per cent respectively — thought their income would drop between 50 and 75 per cent and more than 75 per cent.
Overall, firms in the retail investment space were primarily ‘neutral’ about the impact of coronavirus on their business model, with 54 per cent reporting as such.
Some 4 per cent of firms were positive about the impact while 42 per cent claimed the pandemic would have a negative effect.