Geopolitical risk hits record highs as 95% of City firms name it a top threat to UK
Summary
Q: How worried are financial firms about UK financial stability in 2026?
A: Risk perception has risen slightly. In the Bank of England’s first-half 2026 Systemic Risk Survey, 23% of respondents rated the probability of a high-impact event in the UK financial system over the next 12 months as “high” – up 4 percentage points from late 2025.
Q: What is the biggest risk to the UK financial system right now?
A: Geopolitical risk has surged to record highs. It was cited by 95% of respondents as one of the top five risks most likely to cause major damage – the highest level in the survey’s history – and ranked as the single biggest risk by 46%.
Q: How has geopolitical and cyber risk changed in the Bank of England survey?
A: Geopolitical risk jumped sharply across every measure, reaching all-time highs. Cyberattack remained the second biggest concern, cited by 82% as a top-five risk. Meanwhile, AI-related risks continued to rise, now mentioned by 32% of participants.
Article
UK financial executives are growing more worried about major disruptions hitting the system in the near term, according to the Bank of England’s latest Systemic Risk Survey.
In the first-half 2026 edition of the biannual poll, released Wednesday, 23% of respondents rated the probability of a high-impact event in the UK financial system over the next 12 months as “high” – up four percentage points from the second half of 2025.
No one called it “very high,” but the overall short-term risk perception held roughly steady while the medium-term (1–3 years) outlook improved slightly.
The survey, conducted between 19 January and 16 February, polled senior risk and treasury executives from 57 firms. This includes UK and foreign banks, asset managers, hedge funds, insurers, pension funds, and central counterparties. Notably, this date range would put the survey slightly before the start of the Iran conflict.
It is designed to gauge market participants’ views on threats to financial stability; the results do not necessarily reflect the Bank of England’s own assessment.
Confidence in the system remains high – but focused worries are rising
Respondents are still broadly optimistic about the UK financial system’s stability over the next three years. Some 93% described themselves as either “very confident” (39%) or “fairly confident” (54%). Only 7% said they were “not very confident,” and none reported “no confidence” or “complete confidence.”
Yet when asked specifically about risks that could cause the biggest damage, two threats dominated – and one of them hit record levels.
Geopolitical risk explodes to all-time highs across every measure
Geopolitical risk was cited by 95% of participants as one of the top five risks most likely to have a major impact if it materialised – a 10-point jump from the previous survey and the highest reading in the survey’s history. It was also ranked the single biggest risk by 46% of respondents.
The same risk topped the charts in two other categories:
- Most challenging to manage as a firm: 81% (up 13 points, record high)
- Most likely to materialise: 84% (up 13 points, record high)
Cyberattack remained a close second across the board, cited by 82% as a top-five risk and viewed as the most likely to hit by 56%.
Risks surrounding AI continued their steady ascent, cited by 32% of respondents as a top-five risk – an 11-point increase since the second half of 2025 and the latest leg in an upward trend that began in 2023.
Participants flagged stretched AI equity valuations and potential job-market disruption, leading to high unemployment.
UK political risk also jumped sharply, appearing in 16% of responses.
However, fears of a UK economic downturn eased, falling to 47% (down 9 points) while still tying for third place alongside financial-market disruption/dislocation.
Inflation risk continued its multi-year decline from its 2022 peak. Although it should again be stressed that these figures are based on sentiments before the start of the Iran War.
