UK Government it is working on a plan to prevent its tech firms caught in the collapse of Silicon Valley Bank running out of cash
The Chancellor of the Exchequer, United Kingdom (U.K.) – Jeremy Hunt has said that he is working with the Prime Minister of the U.K. – Rishi Sunak and the Governor of Bank of England – Andrew Bailey to avoid or minimize the damage arising out of dramatic failure of the United States (U.S.) bank – SVB Financial Group, leading to the insolvency of its U.K. arm – Silicon Valley Bank UK Limited.
The Government says it is working at pace on a plan to prevent U.K. tech firms caught in the collapse of Silicon Valley Bank running out of cash. The U.S. regulators shut down the lender on Friday, March 10, 2023, in what is the largest failure of a U.S. bank since 2008.
While there’s no risk to the U.K.’s financial system as a whole, there is a serious risk to some of it’s most promising companies in technology and life sciences.
Speaking on the occasion, Hunt said, “These are very important companies to the U.K., a very important part of our future. We want to find a way that minimises or avoids all losses to those incredibly promising [firms].”
Hunt said that although he could not commit to companies recovering all of their money, the Government will make sure that firms can meet their cash flow needs within the next few days. This means that the firms will be able to pay their staff. U.K. start-ups employing up to 50,000 people could be affected by the collapse.
The bosses of more than 200 U.K. tech companies have signed a letter addressed to Hunt calling for Government intervention. The letter, from Fintech Founders, said many financial technology firms had all of their banking with SVB and will therefore go into receivership imminently unless preventative action is taken.
The letter read, “The firms affected by the collapse of SVB serve millions of people in the UK along with businesses that are critical to our economy. The cost of inaction here means that these firms could fail in the short-term and your technology growth ambitions will fail in the long-term.”
SVB collapsed in the U.S. after failing to raise U.S. $ 2.25 billion (£ 1.9 billion) to plug a loss from the sale of assets, mainly U.S. Government bonds, that were affected by higher interest rates. It’s troubles prompted a run on the bank in the U.S. and sparked investor fears about the general state of the banking sector.
Silicon Valley Bank specialized in lending to early-stage businesses and the company banked nearly half of U.S. venture-backed technology and healthcare companies that listed on stock markets last year. The firm, which started as a California bank in 1983, expanded rapidly over the last decade. It employs more than 8,500 people globally, with most of its operations in the U.S.
