At least 200 UK tech companies are at “severe risk” due to the collapse of the UK arm of a Silicon Valley bank.
Rishi Sunak and the chancellor held urgent talks with Bank of England governor Andrew Bailey this weekend as the bank decided to provide cash for firms hit by insolvency.
In addition, a number of potential buyers turn the failed lender.
Banking giants HSBC and JP Morgan have been among several parties that have explored buying the bank’s UK operations. Sky News reported. Both declined to comment.
Business lender Oaknorth Bank, founded by former Tory donor Rishi Khosla, has also been in takeover talks.
The Bank of London and the Abu Dhabi state-backed investment vehicle ADQ have also shown interest The sky.
It is understood that discussions will continue into the evening as officials begin looking for a buyer before the insolvency deadline.
A survey of 31 venture capital funds, which hold thousands of investments in UK technology and science firms, found that 34 percent, or 336, of their portfolio companies have bank accounts.
More than 200 of them now face short- or long-term cash flow risks, according to the BVCA, an industry body that represents venture capital investors.
Around £2.5bn of capital in these firms is locked up in the lender.
Mr Hunt said the government was “working at full speed” to limit the damage and would develop a plan to help the “cash flow” needs of UK bank customers.
“The Bank of England has made it clear that there is no systemic risk to our financial system,” he told Sky News. Sophie Ridge on Sunday. “But there is a big threat to our technology and life science sectors.”
Mr Hunt added: “We are working on a solution in the near future that will take forward our plans to make sure people can meet their cash flow requirements and pay their staff.”
Labour’s shadow chancellor Rachel Reeves called on Mr Hunt to offer companies more than “warm words” – demanding the chancellor come up with a plan by the time markets open on Monday.
He said New skys: “When markets open tomorrow morning, many UK businesses will not know how to pay their employees and whether they still have deposits and financing arrangements with Silicon Valley banks.”
Saying he was “a little concerned” about the level of urgency Mr Hunt had shown, he added: “I would urge the government to do more than just say warm words, but come forward with concrete plans.
That’s what the CEOs of 140 leading UK start-ups wrote in a letter to Mr Hunt on Saturday calling for urgent government intervention.
“This weekend, many of us will be running numbers to see how technically incompetent we are as technology founders.
“The impact of this is much greater than our own business. The Bank of England’s assessment that SVB’s insolvency would have a limited impact on the UK economy shows a dangerous lack of understanding of the sector and the role it plays in the wider economy today and in the future.”
“Most businesses are operating on very good margins in today’s economy, and the contagion from initial insolvencies will be massive and affect the economy beyond the tech sector.”
Mr. Sunak, speaking to reporters traveling with him to the United States, said the government “does not believe there is a risk of systemic contagion.” The Prime Minister refused to “speculate” when asked if an emergency deposit closure scheme was being considered.
The Chancellor and the Prime Minister must negotiate with the Bank of England about the collapse of the bank
(AP)
The Bank of England announced on Friday that Silicon Valley Bank UK will face insolvency following actions by its US parent company. SVBUK said it would go into insolvency from Sunday evening.
Although the SVB has a limited presence in the UK and does not perform important functions for the financial system, its collapse could have a significant impact on tech startups.
In a statement on Sunday morning, the Treasury said it was treating the issue “as a high priority” and the government was “working on a solution to avoid or minimize damage to some of our most promising companies in the UK”. .
The Treasury said it would develop immediate plans to ensure “the ability to meet the short-term operational and cash flow needs of Silicon Valley Bank UK customers”.
It said the government recognizes that a bank failure “could have a significant impact on the liquidity of the technology ecosystem”.
“Is the government using taxpayers’ money to support it?” When asked, Mr. Hunt said he “doesn’t want to know what the solution is.” The chancellor said he wanted to find “a long-term solution that would reduce or even prevent the loss of some of our most promising companies.”
Mr Sunak said the government recognized the “anxiety and concern of bank customers” and “we are confident we can work to find a solution that will meet people’s operational liquidity and cash flow needs”.
Asked whether Mr Bailey would oversee a robust regulatory environment for UK banks, the Prime Minister told the Bank of England governor a yes.
Chancellor Jeremy Hunt is working on an emergency plan
(PA)
Former Tory chancellor Philip Hammond said the Bank of England should provide “some significant and additional liquidity to whoever buys the SVP”.
He said action to protect the UK’s growing fintech sector was vital. “It’s a very important dynamic sector and we don’t want to see it hit its big target here.”
The insolvency filing came after SVB was taken over by the US government on Friday afternoon in the biggest failure of a US bank since the 2008 financial crisis.
The Bank of England said the company would stop accepting payments and deposits. The move will allow depositors to withdraw up to £85,000 from the deposit insurance scheme.
The U.S. government is expected to make a “material” announcement on Sunday to boost deposits at a Silicon Valley bank and prevent further declines, sources familiar with the matter told Reuters.
Joe Biden administration officials worked over the weekend to assess the effects of the biggest banking failure since the 2008 financial crisis, with a particular focus on the venture capital sector and regional banks, sources said Sunday.
