Governor Jeremy Hunt has warned of “serious risks” to the UK’s technology and life sciences sector following the bankruptcy of the UK branch of California-based Silicon Valley Bank.
On March 10, US federal banking regulators took over control of Silicon Valley Bank (SVB), the largest lender to US technology, life sciences and start-up companies.
The collapse of SVB, the 16th largest bank in the United States, was the largest bank failure since Washington Mutual in 2008 and the last major banking crisis.
The Bank of England (BoE), the UK’s central bank, announced on March 11 that the Silicon Valley Bank (SVBUK) would also fail.
The BoE said it would stop accepting payments and deposits.
Speaking to Sky News on Sunday, Hunt said the collapse “does not pose a systemic risk” to the UK’s financial system.
But he said, “There are serious risks in our technology and life sciences sector, many of which are banked in this bank.”
In a statement Sunday morning, the Treasury Department said it was treating the issue “as a top priority”.
“The government and banks understand the level of concern this poses to Silicon Valley Bank UK’s customers, especially how it will affect their cash flow position in the near term,” the statement said.
It added that the government was aware that the SVBUK’s failure “could have a significant impact on the liquidity of the technology ecosystem.”
Silicon Valley Bank has a limited presence in the UK and does not perform a vital function for the financial system, but the Coalition for a Digital Economy (Coadec) says its collapse could have major implications for tech start-ups. I warned you that there is
Coadec executive director Dom Hallas said on Saturday:
“We are engaged with the UK government, including the Treasury and Number 10, on the potential implications and know that work on policy options has been going on overnight.”
“All you can do”
The prime minister said the government and the Bank of England would do “everything they can” to protect businesses that could lose millions of dollars due to the SVBUK collapse.
“The Prime Minister, myself and the Governor of the Bank of England are absolutely determined to do everything we can to protect the future of these very important companies,” he told Sky News.
“We put forward solutions that help companies with their very important payroll and cash flow requirements, etc., but we want to put in place long-term solutions to ensure their future is secure. .”
Asked if that meant intervening with taxpayer money, he said, “I don’t want to go into what the solution is.”
Hunt also declined to say whether the government would guarantee all deposits of failed bank companies.
He told the BBC: What we do is move very quickly on a plan to enable them to meet their operational cash flow requirements. “
Workers Want a ‘Specific Plan’
The main opposition Labor Party has accused the Conservative government of lacking “urgency” in handling the collapse of the SVBUK.
Labour’s shadow prime minister, Rachel Reeves, has urged the government to offer more than “warm words” to affected businesses.
She told Sky News on Sunday: How many employees and whether deposit and funding arrangements with Silicon Valley banks are still in place.
“Therefore, I urge the government not only to offer warm words, but also to propose concrete plans.”
Reeves told the BBC that the UK startup industry should not pay the price for bank failures.
“Tomorrow morning, we’ll have to hear from the government how they’re going to protect them,” she said.
“We cannot let the UK start-up community bear the cost of this bank failure, as ultimately it will be the UK economy that will pay the price,” she added.
Andrew Moran and PA Media contributed to this report