British tech firms face a “serious risk” over the collapse of the UK arm of Silicon Valley Bank, the chancellor has warned, but said the government was “working at pace” to limit the damage.
Speaking to Sky News’ Sophy Ridge On Sunday programme, Jeremy Hunt said the government and the Bank of England were “absolutely determined” to do everything they could to help support the vital sector.
He had been in talks over the weekend with the prime minister and BoE governor Andrew Bailey to find a solution that ensured the cashflow of customers.
On an official trip to the US, Rishi Sunak told reporters the government was “working to recognise the anxiety” of businesses caught up in the crisis, but did not believe there was a “systemic contagion risk”.
The central bank announced on Friday that Silicon Valley Bank UK was set to enter insolvency, following action taken by its parent company in the US.
It was first reported by Sky News City editor Mark Kleinman.
While Silicon Valley Bank (SVB) has a limited presence in the UK and does not perform functions critical to the financial system, it has been warned its collapse could have a significant impact on tech start-ups.
Mr Hunt told Sky News’ Sophy Ridge On Sunday programme: “The Bank of England has made it very clear there is no systemic risk to our financial system, so people should be reassured on that basis.
“But there is a serious risk to our technology and life sciences sectors.
“It happens to look after the money of some of our most promising and exciting businesses.
“We are working at pace on a solution we will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff.
“But obviously what we want to do is to find a longer term solution that minimises or even avoids completely losses to some of our most promising companies.”
The US treasury has ruled out a major bailout
‘No systemic contagion risk’
Mr Sunak said: “We have been working through over the weekend.
“We don’t believe there is a systemic contagion risk.
“We’re working to recognise the anxiety and the concerns customers of the bank have and making sure we can work to find a solution that secures people’s operational liquidity and cash-flow needs. And that’s what the Treasury is working on.”
He added: “Lots of different things they are looking at.
“Just rest assured they’re working through it over the weekend and are making sure there is a solution that provides operational liquidity for people’s cashflow needs”
‘Government needs to offer more than warm words’
Labour’s shadow chancellor Rachel Reeves told Ridge: “I would urge the government to do more than offer warm words, but come forward with specific plans.”
Tory former chancellor Lord Hammond said: “This is a very important dynamic sector and we don’t want to see it suffer a massive own goal here.”
Yellen rules out major bailout
Meanwhile, US treasury secretary Janet Yellen said she was working closely with banking regulators to respond to the collapse and protect depositors, but a major bailout was not being considered.
She told CBS News: “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out…and the reforms that have been put in place means we are not going to do that again.
“But we are concerned about depositors and are focused on trying to meet their needs.”
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Dom Hallas of the Coalition for a Digital Economy (COADEC) said: “It is clear this could have a significant impact on the UK’s tech start-up ecosystem.”
SVBUK said it will be put into insolvency from Sunday evening.
It is a subsidiary of Silicon Valley Bank (SVB) and was the first location it opened outside the US.
The insolvency announcement came after SVB was put under US government control on Friday afternoon in the biggest failure of a US bank since the 2008 financial crisis.
The BoE said the company will stop making payments and accepting deposits.
The move will allow depositors to be paid up to £85,000 from the deposit insurance scheme.