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Hunt works ‘at the pace’ to help tech companies after Silicon Valley Bank collapse

British tech companies face “serious risk” from the collapse of Silicon Valley Bank UK, the Chancellor has warned, pledging that the government will do “everything possible” to protect them.

Jeremy Hunt said he had been in talks over the weekend with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey and “we are working on a solution.”

He said the plan will support the cash flow needs of businesses affected by the implosion of the bank, a lender to “some of our most promising and exciting businesses.”

Sunak, speaking to reporters who accompanied him to the US, said the government recognizes the “anxiety and concerns that bank customers have” and is “ensuring that we can work to find a solution that will ensure the operating liquidity and people’s cash flow needs.

Labor warned that Britain’s start-up industry must not “pay the price” for the bank’s failure and urged the government to offer more than “warm words” to those affected.

The Bank of England announced on Friday that Silicon Valley Bank UK will enter insolvency, following the collapse of its US parent company, the biggest bank failure since the 2008 financial crisis.

While there is no risk to the UK financial system as a whole, Mr Hunt said “there is a serious risk to our technology and life sciences sectors, many of whom bank with this bank.”

Speaking on Sunday morning political broadcasts, he said: “The Prime Minister and I and the Governor of the Bank of England are absolutely determined to do everything we can to protect the future of these very, very important companies.

“We want to find a way that minimizes or, if possible, prevents all losses for these incredibly promising companies.

“What we will do is very quickly come up with a plan to make sure they can meet their operating cash flow requirements.”

The Chancellor declined to say whether the government will guarantee 100% of the deposits the companies had with the lender or whether it might mean stepping in with taxpayers’ money.

Shadow Chancellor Rachel Reeves stressed the urgency of the situation, noting that when markets open on Monday many businesses will not know if they can pay staff or suppliers.

She said: “We need to know from the government tomorrow morning how they are going to protect them. Whether it’s guaranteed, whether it’s working with the US government on a bailout for Silicon Valley Bank, there are different responses to this problem.

“We cannot allow the UK start-up community to pay the price for this bank failure, because then it will be the UK economy that will ultimately pay the price.

“I urge the government to do more than offer warm words, but come up with specific plans.”

Sunak reiterated that the government does not “believe there is a risk of systemic contagion” as he refused to “enter into speculation” when asked if an emergency plan to cover deposits is being 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, saying “yes” when asked if Mr Bailey is overseeing a sound regulatory environment for banks from United Kingdom.

People look at signs posted outside the entrance to Silicon Valley Bank in Santa Clara, California, on Friday.
People look at signs posted outside the entrance to the Silicon Valley Bank in Santa Clara, Calif., on Friday (Jeff Chiu/AP)

The BVCA, the industry body that represents venture capital (VC) funds that have thousands of investments in UK science and technology companies, said long-term support is needed to protect innovators, entrepreneurs and country funders.

BVCA CEO Michael Moore said: “The immediate implications for the technology and the broader private equity ecosystem are far-reaching. It involves a lot of highly skilled jobs.”

A survey of 31 venture capital funds found that 34% of their portfolio companies, numbering 336, have accounts with Silicon Valley Bank. More than 200 of them now face short- or long-term cash flow risks.

The total amount locked up in Silicon Valley Bank by these companies is around £2.5bn, according to the data.

Tech industry representatives were convened for an emergency roundtable with Treasury Secretary Andrew Griffith on Saturday.

Silicon Valley Bank came under US government control on Friday after being hit by a capital crisis and a bank run.

The Bank of England subsequently ordered its UK subsidiary, the first location to open outside the US, into insolvency effective Sunday evening, putting companies at risk of losing almost all of their cash.

You have stopped making payments and accepting deposits. Up to £85,000 of individual client deposits will be protected through the UK’s deposit insurance scheme, meaning many face significant losses without government intervention.

US Treasury Secretary Janet Yellen said she was working with regulators to protect US depositors but ruled out a major bailout.

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