UK chancellor Jeremy Hunt on Saturday, engaged in discussions on how to prevent a devastating blow to Britain’s digital industry from the failure of Silicon Valley Bank.
More than 200 executives from UK tech companies have called on Downing Street to intervene, claiming that many businesses face an “existential threat” due to banking with SVB’s UK branch.
Although British Prime Minister Rishi Sunak has stated that he wants his country to be “the next Silicon Valley,” the bank crisis poses a severe threat to that goal.
Hunt spoke with Bank of England Governor Andrew Bailey, according to the UK Treasury, while City Minister Andrew Griffith hosted a roundtable discussion with business leaders on Saturday afternoon.
The Treasury acknowledged the issue, saying: “The government recognizes that tech sector companies are often not cash flow positive as they grow, and that they rely on cash on deposits to cover their day-to-day costs.”
Following the closure of the bank’s US business earlier in the day, the Bank of England proceeded to declare the UK division of SVB insolvent late on Friday. Nevertheless, it claimed the UK division had “a limited presence in the UK and no critical functions supporting the financial system”.
On Saturday over 210 start-up founders and leaders signed an open letter to Hunt, warning that “the majority of us as tech founders are running numbers to see if we are potentially technically insolvent”.
The signatories claimed to employ more than 10,000 people and to have raised £3.5 billion in venture capital.
Executives from Tessian, Beamery, Curve, and bit.bio, companies that have each garnered more than $100 million in funding, as well as representatives from a number of smaller businesses, are among those who signed the letter.
However, not everyone in the tech sector agreed with the campaign for government assistance. Others claimed that saving the banks would lead to a “moral hazard,” while several privately expressed concern that simply asking for assistance could spark more panic.
According to people familiar with the discussions, officials are interviewing tech companies to better grasp the scope of the issue and potential solutions.
To preserve Silicon Valley Bank UK’s financial stability, the Treasury said: “We are working with the Bank of England to ensure that Silicon Valley Bank UK’s failure is managed smoothly, and that any disruption is minimised.”