LONDON, March 11 (Portal) – The UK Treasury and the Bank of England are working together to minimize the disruption that could result from a collapse of the UK branch of Silicon Valley Bank (SIVB.O), which US regulators have ruled was confiscated, the ministry announced on Saturday.
Talks are scheduled for later on Saturday to discuss the problems facing UK tech companies hit by the collapse, the ministry said in a statement.
“The government recognizes that companies in the technology sector are often not cash flow positive during their growth and that they rely on cash deposits to meet their day-to-day expenses,” the statement said.
The ministry said the UK banking system has remained strong and resilient, adding that the issues affecting Silicon Valley Bank are specific to it and have no impact on other banks operating in the UK.
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More than 250 chief executives of British tech companies signed a letter to Jeremy Hunt, Britain’s Chancellor of the Exchequer (Treasury Secretary), calling for government action, a copy seen by Portal shows.
“The recent news of the bankruptcy of SVB poses an existential threat to the UK tech sector,” the letter said. “This weekend most of us as tech founders are running numbers to see if we might be technically insolvent.”
“Most companies operate on very tight margins in the current economy and the contagion from initial bankruptcies will be huge, affecting the economy well beyond the technology sector,” the letter reads.
Sky News reported earlier on Saturday that a UK clearing bank, the Bank of London, was considering a bid to bail out SVB’s UK arm.
The Bank of England said on Friday it was seeking a court order to put SVB UK in bankruptcy proceedings after US regulators took over its parent company SVB Financial Group.
Bankruptcy proceedings in the UK have left some depositors eligible for compensation of up to £85,000 (US$102,000) for cash held with lenders or £170,000 for joint accounts.
The British Department for Science, Innovation and Technology is also in talks with the technology companies concerned. A further statement will be made after the talks on Saturday.
Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown, said in an email that there would be aftershocks in the technology sector next week.
“Urgent talks are ongoing about potential acquisitions, with regulators under pressure to negotiate bailouts to avoid further damaging consequences,” Streeter said.
Reporting by Sarah Young and Elizabeth Howcroft; Edited by Tomasz Janowski and David Holmes
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