PM and chancellor to meet Bank of England chief over Silicon Valley Bank UK collapse

Signs are posted on an Silicon Valley Bank in Santa Clara, California following the collapse announcement on Friday. Credit: AP

The prime minister and Chancellor will hold talks with the Bank of England chief in response to the collapse of Silicon Valley Bank UK.

Rishi Sunak and Jeremy Hunt will meet with the Bank's governor, as the fallout provokes unease in the heart of Britain's tech sector.

The Bank of England announced on Friday that Silicon Valley Bank UK is set to enter insolvency, following action taken by its parent company in the United States.

The collapse could have a significant impact on tech start-ups, the sector has warned.

Labour warned that the British start-up industry must not “pay the price” for the bank’s failure and urged the government to offer more than “warm words” to those affected.

Hunt said he has been in talks over the weekend with the PM and Bank of England Governor Andrew Bailey, telling Sunday morning political shows the government was “we are working at pace on a solution”.

He said the plan will backstop the cashflow needs of firms affected by the implosion of the bank, a lender to “some of our most promising and exciting businesses”.

Mr Sunak, speaking to reporters accompanying him to the US, said the Government recognises the “anxiety and the concerns customers of the bank have” and is “making sure we can work to find a solution that secures people’s operational liquidity and cashflow needs”.

Shadow chancellor Rachel Reeves urges the government to act urgently to protect the UK start-up sector before the markets open on Monday

In a statement issued on Sunday morning, the Treasury said it is treating the issue “as a high priority.”

“The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short-term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met,” the statement said.

“The government and the Bank understand the level of concern that this raises for customers of Silicon Valley Bank UK, and especially how it may impact on cashflow positions in the short term.”

It added that the Government recognises that the Silicon Valley Bank UK’s (SVBUK) failure “could have a significant impact on the liquidity of the tech ecosystem”.

The Bank announced on Friday that Silicon Valley Bank UK is set to enter insolvency, following action taken by its parent company in the United States.

While Silicon Valley Bank (SVB) has a limited presence in the UK and does not perform functions critical to the financial system, the Coalition for a Digital Economy (Coadec) warned that its collapse could have a significant impact on tech start-ups.

Chancellor Jeremy Hunt. Credit: Stefan Rousseau/PA

Coadec, a non-profit campaigning for policies to support digital start-ups, responded to the overnight announcement from the Bank that it would apply to put SVBUK into a bank insolvency procedure.

Coadec’s executive director, Dom Hallas, said in a statement on Saturday: “It is clear this could have a significant impact on the UK’s tech start-up ecosystem.

“In light of the concern and panic, I wanted to share an update on what we know and where we are.

“We know that there are a large number of start-ups and investors in the ecosystem who have significant exposure to SVBUK and will be very concerned.

“We have been engaging with the UK government, including Treasury and No 10, about the potential impact and I know that work has been going on overnight on policy options.”

Mr Hunt spoke to Bailey about minimising the disruption from SVBUK’s failure, according to the Treasury.

Andrew Griffith, the Economic Secretary to the Treasury, was due to hold a roundtable with representatives from affected firms to discuss their concerns.

Mr Hallas, in a second statement on Saturday evening, said discussions are still ongoing with the Treasury and others and are likely to continue tomorrow.

The Coadec executive attended the roundtable with the Treasury and the Science Department alongside other tech sector stakeholders.

Mr Hallas said: “Of course, the ticking clock is a huge problem for companies. Right now, the key concerns remain immediate liquidity for companies and functional access to banking services on Monday.”

He added that impacted start-ups should maintain contact with the Treasury and urged them to share any other concerns.

Shadow chancellor Rachel Reeves warned on Sunday: “The collapse of SVB could have serious implications for the UK's start-up sector, which drives growth and innovation across the economy.

“The Chancellor must act urgently to understand the exposure of UK firms to the bank, and take action to prevent large-scale damage being done to this crucial sector of the British economy.”

A crowd forms outside of an entrance to Silicon Valley Bank in Santa Clara on following news of the collapse. Credit: AP

What happened to Silicon Valley Bank?

Silicon Valley Bank UK (SVBK) 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 Bank of England said the firm will stop making payments and accepting deposits.

The move will allow depositors to be paid up to £85,000 from the deposit insurance scheme.

A statement on the SVB website said: “We are announcing that following conversations with the Prudential Regulatory Authority there is an intention, barring any intervening event, to put Silicon Valley Bank UK Limited into insolvency from Sunday evening.

“We are determined to work on the behalf of our clients and are proud of our employees in their engagement with you.

“If clients have any questions please get in touch with us and we will try our best to answer any and all of your queries.”

The statement from the Bank of England said: “The Bank of England, absent any meaningful further information, intends to apply to the Court to place Silicon Valley Bank UK Limited (‘SVBUK’) into a Bank Insolvency Procedure.

“A Bank Insolvency Procedure would mean that eligible depositors are paid out by the FSCS as quickly as possible up to the protected limit of £85,000 or up to £170,000 for joint accounts.

“SVBUK’s other assets and liabilities would be managed in the insolvency by the bank liquidators and recoveries distributed to its creditors.

“SVBUK has a limited presence in the UK and no critical functions supporting the financial system.

“In the interim, the firm will stop making payments or accepting deposits.”