UK rushes to help tech companies after Silicon Valley bank collapse

The government says it is working “at a fast pace” on a plan to prevent British technology companies caught in the Silicon Valley bank collapse from running out of cash.

The Treasury said it wanted to “minimize the damage to some of our most promising UK companies” after the failure of the US bank on Friday.

Businesses could start having problems on a Monday morning without intervention.

The bank’s UK subsidiary will go bankrupt as of Sunday evening.

Prime Minister Rishi Sunak, Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey “were up late last night” and had been “working all weekend on a solution” to the UK’s Silicon Valley bank meltdown, Mr Hunt told the BBC. NBC Sunday with The Laura Kuensberg Program.

Although there is no risk to the UK financial system as a whole, “there is a serious risk to some of our promising technology and life sciences companies,” said Mr Hunt.

“These are very important companies for the UK, and they are a very important part of our future.”

“We want to find a way to minimize or avoid all the losses that the incredibly promising ones have incurred [firms]Mr. Hunt said, though he said he couldn’t commit to getting the companies back all of their money.

He said the government was “working rapidly” to present a plan to ensure businesses can meet their cash flow needs “within the next few days”.

He said this plan means companies can pay their employees. “That’s the big question we’ve been asking in the last 24 hours.”

But Labour’s shadow chancellor, Rachel Reeves, said businesses urgently needed to hear how the government planned to deliver aid.

She said startups need to pay wages and suppliers, and some may feel pressure on stock prices, or even investors say they no longer trust.

“We need, tomorrow morning, to hear from the government, how are you going to protect the companies,” she said, whether that be safeguards, or working with the US government to save the bank.

Asked if the government will come up with a solution by the time the markets open on Monday morning, Prime Minister Sunak said: “The treasury is working at a fast pace.”

More than 200 UK tech chiefs signed a letter to Mr Hunt on Saturday calling for government action.

The letter, from Fintech Founders, said many fintechs have all of their banking services with SVB “and will therefore enter receivership immediately unless preventative action is taken.”

“The companies affected by the SVB collapse serve millions of people in the UK along with businesses that are critical to our economy,” the letter states.

“The cost of inaction here means that these companies can fail in the short term and your technological growth ambitions will fail in the long term.”

A source at a technology company told the BBC: “It looks like it could be a nice stop for tech in the UK.”

“On this Monday, at least 200 companies that employ tens of thousands of people will find that they cannot pay the salaries of their employees or suppliers because the bank they have an account with has gone bankrupt,” the source said.

The source added that between 30% and 40% or start-ups in the UK employing up to 50,000 people could be affected by the crash.

Michael Moore, managing director of the British Private Equity and Venture Capital Association, said this was a “matter of urgency” and that “help is needed by tomorrow.” [Monday]Technology companies and entrepreneurs.

SVB collapsed in the US after failing to raise $2.25bn (£1.9bn) to bridge a loss from the sale of assets, mainly US government bonds, which were hit by rising interest rates.

The bank’s troubles triggered a bank flight in the US and raised investor concerns about the overall health of the banking sector.

US Treasury Secretary Janet Yellen said on Sunday that she is working closely with regulators to protect US depositors, but is not considering a bailout.

The Silicon Valley bank specializes in lending to early-stage businesses, and the company syndicated nearly half of the US-backed tech and healthcare companies that listed on the stock markets last year.

The company, which began as a California bank in 1983, has expanded rapidly over the past decade. It employs more than 8,500 people globally, and most of its operations are in the United States.

But it has come under pressure because high interest rates make it difficult for startups to raise money through private fundraising or stock sales. More customers were withdrawing deposits on an upward trend last week.

Silicon Valley Bank UK has stopped making payments or accepting deposits before entering bankruptcy from Sunday.

The move will allow individual depositors to pay up to £85,000 from the UK Deposit Insurance Scheme.

However, the government’s obligation to protect any more than this would be a “serious moral hazard,” the permanent secretary of the exchequer said tweeted Nick MacPherson That is, depositors would lack the incentive to protect against risk if they expected the government to pay in full in any UK bank collapse.