UK tech firms await government support after Silicon Valley Bank collapse
Several British tech firms are breathing more easily, following HSBC's announcement that it would purchase Silicon Valley Bank's (SVB) UK arm.
The government and Bank of England stepped in to facilitate the sale, for a nominal sum of £1.
The Chancellor, Jeremy Hunt, says the deal has protected all customer deposits without involving taxpayer cash.
This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC
— Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
Deposits will be protected, with no taxpayer support
I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise
Hunt had previously told the BBC that while the collapse of SVB poses no threat to the UK's financial system, there is a significant risk to some of the country's most promising technology and life sciences firms.
"These are very important companies to the UK, a very important part of our future."
US regulators closed SVB on Friday, marking the most significant collapse of a US bank since 2008.
SVB was renowned for its focus on lending to early-stage businesses. It provided banking services for almost half of the US technology and healthcare companies that received backing from venture capitalists and went public last year.
According to the Bank of England, SVB's UK arm held around £6.7 billion of deposits, £5.5 billion in loans as of Friday last week. while its balance sheet stood at £8.8 billion.
The reason for the bank's collapse was due to its inability to secure $2.3 billion to compensate for the loss it incurred from the sale of assets, which mainly comprised US government bonds that were adversely affected by increased interest rates.
The bank's UK division was put into insolvency on Sunday.
The Bank of England initially announced that qualified depositors would receive payouts up to the protected limit of £85,000, or £170,000 for joint accounts, as per the guidelines of the Financial Services Compensation Scheme. The remainder of SVB's assets are to be disseminated by liquidators in due course.
" [The] most common phrase in my inbox right now is 'we can't make payroll with the insured amount'," Matt Clifford, co-founder of venture capital business Entrepreneur First, told The Standard this weekend.
"The core question is just what happens to those who can't access money they need. A bunch of them will not make payroll and a bunch of them will go under.
"UK government rightly wants Britain to be one of the world's great tech ecosystems. First priority [is] ensuring that thousands of UK startups make payroll this month."
Seb Wallace, a venture capital investor at Triple Point, noted: "This [collapse] has rammed home a prudent cash management approach and firms have a clear need now to have multiple bank accounts to spread risk."
Over 200 executives from UK tech companies signed a letter to Mr. Hunt on Saturday, urging government intervention.
The letter, submitted by Fintech Founders, highlighted that several fintech firms carried out all their banking operations with SVB and could have been forced into receivership without action.
"The firms affected by the collapse of SVB serve millions of people in the UK along with businesses that are critical to our economy," the letter read.
Apart from its UK branch, SVB also had operations in several other countries, including Canada, Denmark, China, Germany, Israel, India, and Sweden.
