How does FSCS protection actually work?

That’s fine. It was expected they could pay it back eventually. It’s pretty hard for an entire country to fail (or at least it seemed that way in 1948, I’m not so sure now).

But one institution failing is currently setting us up for, at current rates, 78 years. Therefore just five institutions would need almost 4 centuries (which is where I’d start saying it is a significant length of time).