It was feared that at least 200 tech and science companies would be affected by the collapse of Silicon Valley Bank UK as a slew of potential buyers circled the failed lender.
Chancellor Jeremy Hunt said the government is working “at pace” on a plan to prevent affected companies from going bust, which could include a private emergency takeover deal.
A survey of 31 venture capital funds holding thousands of investments in UK technology and science companies found that 34% of their portfolio companies – 336 in total – have bank accounts.
More than 200 of them are now at short or long-term cash flow risk, according to data from BVCA — the industry body that represents venture capital investors.
About £2.5 billion of capital from these companies is tied up with the lender.
California-based parent Silicon Valley Bank imploded and its assets seized by US regulators on Friday – the biggest bank collapse since the 2008 financial crisis.
The Bank of England then declared its British subsidiary bankrupt on Sunday night.
Banking giants HSBC and JP Morgan were among several parties considering buying the bank’s UK operations, Sky News reported. Both declined to comment.
Oaknorth Bank, a corporate lender founded by former Tory donor Rishi Khosla, was also in takeover talks, according to the PA news agency.
According to Sky, there was also interest from the Bank of London and the state-backed investment vehicle ADQ from Abu Dhabi.
Talks were understood to have continued into the evening as officials scramble to find a buyer before the bankruptcy deadline.
Mr Hunt warned the tech and science sectors were at “serious risk” but said there was no risk to the UK’s financial system as a whole.
He said the government and Bank of England were also looking at ways to extend a temporary lifeline for companies hit by the bank’s collapse, a lender to “some of our most promising and exciting businesses”.
Speaking on political broadcasts on Sunday morning, he said: “The Prime Minister and I, as well as the Governor of the Bank of England, are absolutely determined to do everything in our power to protect the future of these very, very important companies.
“We want to find a way that minimizes or, if possible, avoids any losses for these incredibly promising companies.
“We will come up with a plan very quickly to ensure they can meet their operational cash flow needs.”
The Chancellor declined to say whether the government will guarantee 100% of companies’ deposits.
Only £85,000 of individual customer deposits are protected by the UK’s deposit guarantee scheme, meaning many have suffered huge losses without government intervention.
Shadow Chancellor Rachel Reeves stressed the urgency of the situation, noting that when the market opens on Monday, many companies will not know if they can pay employees or suppliers.
She said: “We need to hear from the government tomorrow morning on how they are going to protect them. There are different answers as to whether this is guaranteed, whether the US government is working to rescue the Silicon Valley Bank.
“We cannot allow the UK start-up community to pay the price for this bankruptcy because ultimately the UK economy will pay the price.
“I would urge the government to do more than just make warm words, but come up with concrete plans.”
Prime Minister Rishi Sunak, speaking to reporters accompanying him to the United States, said the government recognizes the “fears and concerns of the bank’s customers” and “ensures that we can work to find a solution that meets operational… Ensuring liquidity and people’s cash flow”.
He reiterated that there was no “systemic contagion risk” as he declined to “enter speculation” when urging whether an emergency deposit-covering scheme would be considered.
The Prime Minister, who was updated on the situation by the Chancellor during his flight to San Diego, backed the Bank of England governor and said “yes” when asked if Andrew Bailey oversees a robust regulatory environment for UK banks .
Tech industry officials were convened for an emergency roundtable with Treasury Secretary Andrew Griffith on Saturday.
BVCA Director General Michael Moore said: “The immediate implications for technology and the broader private capital ecosystem are far-reaching. There are many highly qualified jobs at stake here.”
Silicon Valley Bank was placed under US government control on Friday after being hit by a capital crisis and bank run.
US Treasury Secretary Janet Yellen said she was working with regulators to protect US depositors but ruled out a major bailout.