LONDON — The U.K. government was scrambling on Sunday to limit the fallout for the British tech sector from the collapse of Silicon Valley Bank, a big U.S. lender to many startups and technology companies.
The government is treating the potential reverberations as “a high priority” after a run on deposits drove California-based SVB into insolvency, marking the largest bank failure since the global financial crisis, U.K. Chancellor of the Exchequer Jeremy Hunt said in a statement Sunday morning. U.S. Treasury Secretary Janet Yellen and other policymakers were on alert that problems at SVB could spread.
Hunt said the British government is working on a plan to backstop the cashflow needs of companies affected by SVB’s implosion and the halt in trading of its British unit, Silicon Valley Bank UK. The Bank of England announced on Friday that the U.K. unit is set to enter insolvency.
Silicon Valley Bank’s “failure could have a significant impact on the liquidity of the tech ecosystem,” Hunt said.
The government is working “to avoid or minimize damage to some of our most promising companies in the U.K.,” the chancellor said. “We will bring forward immediate plans to ensure the short-term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met.”
Discussions between the governor of the Bank of England, the prime minister and the chancellor were taking place over the weekend, according to the statement.
Speaking on Sky News Sunday morning, Hunt said that Bank of England Governor Andrew Bailey had made it clear that there was “no systemic risk to our financial system.” But Hunt warned that there was a “serious risk” to the technology and life-sciences sectors in the U.K.
Ministers held talks with the tech industry on Saturday after tech executives in an open letter warned Hunt that the SVB collapse posed an “existential threat” to the U.K. tech sector. They called for government intervention.
Britain’s science and technology minister on Saturday pledged to do “everything we can” to limit the repercussions on U.K. tech companies.
Michelle Donelan, who heads the newly created Department for Science, Innovation and Technology, said in a tweet: “We recognize that the tech sector is often not cashflow positive as they grow and I am determined to stand with them as we do everything we can to minimize impact on the sector.”
A bank insolvency procedure for Silicon Valley Bank UK would mean eligible depositors would be paid the protected limit of £85,000, or up to £170,000 for joint accounts.
The Bank of England said in its Friday statement that SVB UK “has a limited presence in the U.K. and no critical functions supporting the financial system.”