by British tech companies are at “serious risk” from the collapse of Silicon Valley Bank UK, the Chancellor warned, as he vowed the government would “do everything we can” to protect them.
Jeremy Hunt said he held talks with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey over the weekend and “we are working flat out to find a solution”.
He said the plan would support the cash flow needs of companies hit by the implosion of the bank, a lender to “some of our most promising and exciting businesses.”
Labor warned Britain’s start-up industry should not “pay the price” for the bank’s failure and urged the government to say more than “warm words” to those affected.
The Bank of England announced on Friday that Silicon Valley Bank UK will file for bankruptcy following actions by its parent company in the US.
While there is no risk to the UK financial system as a whole, Mr Hunt said “there is serious risk to our technology and life sciences sectors, many of which work with this bank”.
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 with the lender or whether that could mean stepping in with taxpayers’ money.
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.”
In a statement Sunday morning, the Treasury Department said it was treating the issue “with high priority”.
“The Government and the Bank understand the level of concern this is causing for Silicon Valley Bank UK clients and in particular how this may affect cash flow positions in the near term,” the statement said.
It added that the government recognizes that the failure of Silicon Valley Bank UK (SVBUK) “could have a significant impact on the liquidity of the tech ecosystem”.
While Silicon Valley Bank (SVB) has a limited presence in the UK and does not perform any functions critical to the financial system, the Coalition for a Digital Economy (Coadec) warned its collapse could have a major impact on tech startups.
Coadec chief executive Dom Hallas said on Saturday: “We know there are a large number of startups and investors in the ecosystem who are significantly exposed to SVBUK and will be very concerned.
“We have spoken to the UK Government, including Treasury and No 10, about the potential impact and I know policy options have been worked on overnight.”
SVBUK said it would be sent into bankruptcy from Sunday night. It is a subsidiary of Silicon Valley Bank (SVB) and was the first location it opened outside of the United States.
The bankruptcy announcement came after SVB was placed under US government control on Friday afternoon in the biggest US bank failure since the 2008 financial crisis.
The Bank of England said the company will stop making payments and will no longer accept deposits.
