UK prepares cash lifeline for tech companies hit by Silicon Valley Bank collapse

The UK chancellor is preparing a dramatic intervention to provide a cash lifeline to scores of tech businesses next week as he seeks to contain the damage caused by the collapse of Silicon Valley Bank.

Jeremy Hunt was looking to “avoid or minimise damage to some our most promising companies in the UK”, the Treasury said in a statement at 7.30am on Sunday.

“We will bring forward immediate plans to ensure the short-term operational and cash flow needs of Silicon Valley Bank UK customers are able to be met,” the Treasury said.

Hunt has ruled out a bailout of the UK arm of SVB and is instead focusing on supporting the cash flow of the many tech groups with deposits at the bank. They could struggle to pay wages and bills next week.

The chancellor is holding talks with Andrew Bailey, Bank of England governor, and Rishi Sunak, prime minister, to finalise a plan, which could be in place as soon as Monday.

More than 200 UK-based tech company executives have urged Downing Street to step in, warning that many companies faced an “existential threat” because they banked with the UK arm of SVB.

Sunak says he wants to turn Britain into “the next Silicon Valley” and is said by government insiders to be determined to contain the fallout for the tech sector from the bank’s collapse.

The Bank of England announced on Friday that Silicon Valley Bank UK was set to enter insolvency, following action taken by its parent company in the US, adding that it had a limited presence in the UK and did not perform functions critical to the financial system.

But the Treasury said: “The government and the Bank understand the level of concern that this raises for customers of SVB UK, and especially how it may impact on cash flow positions in the short term.

“The UK has a world leading tech sector, with a dynamic start-up and scale-up ecosystem. The government recognises that, given the importance of SVB to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem.”

Rachel Reeves, Labour’s shadow chancellor, said the collapse of SVB could have serious implications for the UK’s start-up sector. “The chancellor must act urgently to understand the exposure of UK firms to the bank, and take action to prevent large-scale damage being done to this crucial sector of the British economy,” she said.

On Saturday, more than 200 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 said they employed more than 10,000 people and had raised venture funding totalling £3.5bn.

“The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held,” the letter said.

“This is a real moment of crisis for British start-ups,” said Dom Hallas, executive director of Coadec, a lobby group representing UK-based tech companies. “Without a clear way forward by Monday the risk will grow — it’s critical that government has a plan in place by then.”

Signatories to the letter include executives from Tessian, Beamery, Curve and bit.bio, companies that have each raised funding in excess of $100mn, as well as several smaller groups.

Daniel Shakhani, founder of Salary Finance and an investor in a series of companies that have received SVB funding, said: “This is a crisis that requires UK government involvement as it’s not clear what the outcome is going to be for the UK entity, which could be left orphaned if SVB US gets sold.”

Hephzi Pemberton, founder of data consultancy Equality Group, said that 90 per cent of its funds were frozen in SVB UK. “We are scrambling to make payroll for March and it will involve a lot of manoeuvring to make it happen,” she said.