- By Tom Espiner & Laura Kuensberg
- BBC News
The government says it is working “at pace” on a plan to prevent UK tech companies caught up in the Silicon Valley Bank collapse from running out of cash.
The Treasury said it wanted to ‘minimize the damage to some of our most promising businesses in the UK’ after the US bank collapsed on Friday.
Businesses could start experiencing problems Monday morning without intervention.
The British branch of the bank will be bankrupt from Sunday evening.
Prime Minister Rishi Sunak, Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey ‘woke up late last night’ and ‘worked all weekend to find a solution’ to the Silicon Meltdown Valley Bank UK, Mr Hunt told the BBC’s Sunday Program with Laura Kuenssberg.
While there is no risk to the UK financial system as a whole, “there is a serious risk to some of our most promising businesses in technology and life sciences,” said Mr. .Hunt.
“These are very important businesses for the UK, a very important part of our future.”
“We want to find a way that minimizes or avoids any losses from these incredibly promising (businesses),” Mr Hunt said, although he said he could not commit to the companies recouping everything. their money.
He said the government was “working at pace” to present a plan to ensure businesses could meet their cash needs “in the coming days”.
This plan will mean businesses will be able to pay their staff, he said. “That’s the big request we’ve had in the last 24 hours.”
But Rachel Reeves, Labour’s shadow chancellor, said businesses urgently needed to know how the government planned to help.
She said start-ups have to pay salaries and suppliers, and some may feel pressure on stock prices, or even see investors saying they no longer have confidence.
“We need to hear tomorrow morning from the government how they’re going to protect businesses,” she said, whether it’s guarantees or working with the US government on a bailout for the bank.
Asked if the government would come up with a solution by the time markets open on Monday morning, Prime Minister Mr Sunak said: ‘The Treasury is working at pace’.
More than 200 UK tech bosses signed a letter to Mr Hunt on Saturday calling for government action.
The letter, from Fintech Founders, said many fintech companies had all their banking with SVB “and will therefore be put into receivership shortly unless preventative action is taken.”
“The businesses affected by the SVB collapse serve millions of people in the UK as well as businesses that are essential to our economy,” the letter said.
“The cost of inaction here means these companies could fail in the short term and your ambitions for tech growth will fail in the long term.”
A tech company source told the BBC: ‘This all seems to be pretty terminal for UK tech.
“This Monday, at least 200 businesses employing tens of thousands of people will find they cannot pay their staff or suppliers because the bank they had an account with has gone bankrupt,” the source said.
Between 30% and 40% of UK start-ups employing up to 50,000 people could be affected by the collapse, the source added.
Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said it was an “urgent matter” and that “help is needed by tomorrow (Monday)” for companies technologies and entrepreneurs.
SVB collapsed in the US after failing to raise $2.25bn (£1.9bn) to make up for a loss on the sale of assets, mostly US government bonds, which have been affected by higher interest rates.
His setbacks sparked a run on banking in the United States and raised fears among investors about the overall state of the banking industry.
US Treasury Secretary Janet Yellen said on Sunday she was working closely with regulators to protect US depositors, but was not considering a bailout.
Silicon Valley Bank specialized in lending to start-up companies, and the company funded nearly half of America’s venture capital-backed tech and healthcare companies that went public in the year last.
The company, which started as a California bank in 1983, has grown rapidly over the past decade. It employs more than 8,500 people worldwide, with most of its operations in the United States.
But it has come under pressure as higher rates make it harder for start-ups to raise funds through private fundraising or stock sales. More customers were withdrawing deposits in a trend that snowballed last week.
Silicon Valley Bank UK stopped making payments or taking deposits before filing for bankruptcy from Sunday.
The move will allow individual depositors to receive up to £85,000 from the UK deposit insurance scheme.
However, the government pledging to protect more than that would be a “serious moral hazard”, said the permanent treasury secretary. Nick Macpherson tweeted – i.e. depositors would have no incentive to hedge against risk if they expected the government to pay in full in the event of a UK bank collapse.