After Silicon Valley Bank collapse UK to help tech firms

• The government is developing a scheme to ensure UK tech companies affected by Silicon Valley Bank’s bankruptcy.
• The collapse of Silicon Valley Bank UK has had a 30% to 40% impact on UK start-ups.
• Leading to a bank run in the US and investor concerns about the overall health of the banking industry.

The government is developing a scheme to ensure that UK tech companies affected by Silicon Valley Bank’s demise won’t run out of money.

The Treasury said it intended to “minimize damage to some of our most promising enterprises in the UK” after the American bank’s bankruptcy last Friday.

The bank was shut down by US regulators on Friday, marking the biggest failure of a US bank since 2008.

From Sunday night, the bank’s UK unit will enter insolvency.

In an effort to find a solution to the failure of Silicon Valley Bank UK, Prime Minister Rishi Sunak, Chancellor Jeremy Hunt, and Governor of the Bank of England Andrew Bailey “were up late last night” and worked all weekend, Mr. Hunt said on Sunday.

While there’s no risk to the UK’s financial system as a whole, “there is a serious risk to some of our most promising companies in technology and life sciences”, Mr. Hunt told the Media.

“These are very important companies to the UK, a very important part of our future.”

“We want to find a way that minimizes or avoids all losses to those incredibly promising [firms],” Mr Hunt said, although he said he could not commit to companies recovering all of their money.

He said the government was “working at pace” to bring forward a plan to make sure firms can meet their cashflow needs “within the next few days”.

That plan will mean companies can pay their staff, he said. “That’s the big ask we’ve had in the last 24 hours.”

A letter to Mr. Hunt on Saturday that demanded government action was signed by more than 250 CEOs of UK tech companies.

One source in a tech firm told the Media: “It all feels like it could be pretty terminal for UK tech.”

“This Monday, at least 200 firms employing tens of thousands of people will find they can’t pay their staff or suppliers because the bank they had an account with has gone bust,” the source said.

The collapse could have a 30% to 40% impact on UK start-ups with up to 50,000 employees, the insider continued.

After failing to raise $2.25 billion (£1.9 billion) to cover a loss from the sale of assets, primarily US government bonds, that were negatively impacted by increased interest rates, SVB failed to survive in the US.

Its problems led to a bank run in the US and raised investor concerns about the overall health of the banking industry.

Over half of the US venture-backed technology and healthcare companies that went public last year had their banking handled by Silicon Valley Bank, a corporation that specialized in lending to early-stage businesses.

The company, which began as a bank in California in 1983, expanded quickly during the previous ten years.

It has more than 8,500 employees worldwide, with the majority of its operations being in the US.

Yet, it has come under attack as it becomes more difficult for start-ups to generate money through private fundraising or share sales as a result of rising rates. Client withdrawals increased last week as a result of a trend that started out small.

Prior to declaring bankruptcy on Sunday, Silicon Valley Bank UK ceased accepting deposits or processing payments.

Individual depositors will now be able to receive payments from the UK’s deposit protection system up to a maximum of £85,000.

Treasury Permanent Secretary Nick Macpherson tweeted that if the government committed to providing any more protection than this, it would pose a “serious moral hazard” because depositors would have no incentive to take precautions against risk if they believed the government would cover all losses in the event of a UK bank failure.

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