British tech companies have hailed the sale of Silicon Valley Bank UK (SVB UK) to HSBC after warning that about a third of the country’s tech sector could be lost if the bank collapsed.
An influential tech group said the level of anxiety for many startups was “off the scale” in the hours of intense negotiations leading up to the bailout deal.
Russ Shaw, the founder of Tech London Advocates, told the PA news agency that well over 100 tech leaders and investors worked with the government, Treasury, Bank of England and tech companies over the weekend to demonstrate the scale of the problem.
He told the PA: “We have been trying to gather information, to pass it to the government to say the size and scale of this is going to be big.
“The Prime Minister has said he wants the UK to become a science and technology powerhouse, but if we don’t get that in place by Monday we will likely lose about a third of our tech sector to this one bank closure.
“So it was meaningful and I think we felt like we were staring into the abyss.”
It comes after the US government tried to halt a potential banking crisis after the SBV failed in what is the second largest banking collapse in history.
Mr Shaw said the smallest firms still have around £25,000 in SVB UK but he is in touch with a start-up that has invested more than £10m in the bank.
Some companies have all their money in the ailing bank, he emphasized, which is leading to great uncertainty in view of the impending insolvency.
“We estimated that several thousand UK start-ups would likely be affected, so it was big.”
However, Mr Shaw said the sector breathed “a collective sigh of relief” when it was confirmed that HSBC would take over SVB UK’s assets and banking services would continue as usual.
Dom Hallas, the executive director of the Coalition for a Digital Economy (Coadec), which represents UK scale-ups, was one of the tech leaders working closely with the government over the weekend.
Mr. Hallas echoed Mr. Shaw’s opinion that the sale was a great relief to affected companies whose deposits were at risk.
He said: “The Government deserves a big thank you from the very top, to HM Treasury who understood and rose to the challenge, to the large number of officials who probably haven’t slept since Friday.
“It’s flippant to say – but there are hundreds of founders across the country who will thank you for your work.”
It is understood that a number of banks were interested in buying SVB UK but ultimately HSBC won the deal.
Mr Shaw added: “HSBC has just acquired an incredible portfolio of companies, all of which are very healthy. It’s not that they were desperate – the problem is that they couldn’t access their funds.
“Suddenly, in one fell swoop, HSBC has acquired a number of great, high-growth, scaling companies. It feels like a win-win situation.”
Meanwhile, numerous venture capital funds also held money with SVB, particularly in the US, where the bank was a major lender to the technology industry.
Konstantin Sidorov, the chief executive of the London Technology Club, told PA that the bailout deal marks a “defining moment” for Britain as a key global technology and science hub.
He said: “It’s thanks to the government for reacting quickly and understanding the importance of the bank’s role in the industry. It’s an amazing sign that supporting the industry is very, very serious.
“I think it would have been impossible for the government to say we support technology and we’re doing everything we can for the sector and then just destroy what they’ve built over the years.”
He added that the move gave investors confidence after a “very nervous weekend” for the sector.