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 critical businesses.
He said he had been in talks over the weekend with Prime Minister Rishi Sunak and BoE governor Andrew Bailey to find a solution.
But Labour has argued the government need to offer more than “warm words” to companies affected
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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 said: “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.
“I want to reassure people, I’ve been in discussions over the weekend until late last night with the prime minister, the governor of the Bank of England, many other people.
“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.”
He added: “The prime minister and I and the governor of the Bank of England are absolutely determined to do everything we can to protect these very, very important companies.
“We will come forward with a solution that helps those very, very important companies with things like payroll and their cash flow requirements, but we also want to put in place a longer-term solution so that their futures are secure.”
Asked if that could mean stepping in with taxpayers’ money, he said he did not “want to go into what the solution is”.
But Labour’s shadow chancellor Rachel Reeves told Ridge: “I am slightly concerned about the urgency that you heard from the chancellor there because when markets open tomorrow morning, a lot of businesses in the UK are not going to be clear about how they can pay the wages of their staff and whether their deposits with Silicon Valley Bank and their financing arrangements are still in place.
“So, I would urge the government to do more than offer warm words, but come forward with specific plans.”
Tory former chancellor Lord Hammond said: “It’s not going to affect many individuals in the UK because not many people bank with Silicon Valley Bank, but it is going to affect the very important fintech sector in our economy, where there’s a huge concentration around Silicon Valley Bank UK.
“There’s a lot of small early stage businesses that are quite important to this economy, quite important to keeping our financial services sector at the cutting edge, who will be very, very nervous today.
“This is a very important dynamic sector and we don’t want to see it suffer a massive own goal here.”
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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.