More than 200 UK-based tech company executives have urged Downing Street to intervene following the collapse of Silicon Valley Bank, which they warned was “a potential threat to the UK tech sector”.
The Bank of England placed SVB’s UK branch into insolvency after the bank’s US unit was closed late on Friday, but said it had a “limited UK presence and no significant functions supporting the financial system”. .
On Saturday nearly 210 start-up founders and leaders signed an open letter to UK Chancellor Jeremy Hunt, warning that “as tech founders most of us are running the numbers to see whether We are potentially technically bankrupt”.
The signatories said they employ more than 10,000 people and have raised a total of £3.5bn in venture funding.
“Most of the most exciting and dynamic technology businesses are with SVBs and have little or no diversification in their deposits,” the letter said.
“This is a real moment of crisis for British start-ups,” said Dom Halas, executive director of Coadec, a lobby group representing UK-based tech companies. “Without a clear way forward by Monday the risk will increase – it is vital that the government has a plan in place by then.”
Signatories to the letter include executives from Tession, Beamery, Curve and Bit.Bio, companies that have each raised more than $100 million in funding, as well as a number of smaller firms.
The letter further states: “The Bank of England’s assessment that SVB going into bankruptcy will have a limited impact on the UK economy demonstrates an alarming lack of understanding of the sector and its role in the wider economy, both today and in the future ”
Daniel Shakhani, founder of Salary Finance and an investor in a range of companies receiving SVB funding, said: “This is a crisis that requires UK government involvement as it is unclear what the outcome is going to be for the UK entity. which may be orphaned if SVB US is sold.”
As of late on Friday, SVB UK had said it was an “independent subsidiary” of US-based SVB Financial Group, with its own balance sheet and “ring fence” funds. But it was forced to apply for £1.8 billion of liquidity that day as panic gripped tech companies and their investors.
Companies that are unable to access funds stuck in the UK branch of the SVB could themselves go under, officials said, warning of a “meaningful” increase in unemployment as the effects rippled through the UK economy.
Officials are canvassing tech companies to better understand the scale of the problem and possible solutions, according to people familiar with the discussions.
The Treasury said: “We are working with the Bank of England to ensure that the failure of Silicon Valley Bank UK is managed smoothly, and that any disruption is minimised.”
Hunt has discussed the situation with Bank of England Governor Andrew Bailey, and the Treasury’s Economic Secretary Andrew Griffith is in contact with affected firms and will host a meeting with them later today, the Treasury said.
The Bank of England declined to comment on the possibility of additional support for customers with large deposits in SVBs.
Shadow Chancellor Rachel Reeves tweeted that the situation was “really worrying for many firms”. “The Chancellor must urgently assess the scale of the risk to UK firms posed by the collapse of the SVB, and work with firms to manage those risks,” he added.
Insolvency procedures are the BoE’s preferred resolution strategy for smaller banks that “do not supply transaction accounts or other significant operations on a scale likely to justify” the use of resolution measures, which ensure that a The bank may continue with its core business during its plan. Wind-down is done.
Unlike a regular corporate insolvency, a bank insolvency process prioritizes paying depositors the £85,000 protected by the FSCS “as soon as is reasonably practicable”, with a target of seven days. The money can be raised through an industry levy “if necessary” and later recovered from the bankruptcy as assets are sold.
The second objective of the bank liquidator is to achieve the best outcome for the creditors of the bank as a whole.