LONDON, March 11 (Reuters) – The UK Treasury and the Bank of England are working together to minimize the disruption that could result from a collapse of the UK arm of Silicon Valley Bank (SIVB.O), which has seized taken by US regulators. , the ministry said on Saturday.
Talks were scheduled later on Saturday to discuss the issues faced by British tech companies affected by the collapse, the ministry said in a statement.
“The government recognizes that companies in the technology sector are often not cash flow positive as they grow and rely on cash on deposit to cover their day-to-day expenses,” the statement said.
The ministry said the UK banking system remained strong and resilient, adding that the issues faced by Silicon Valley Bank were specific to the bank and did not affect other banks operating in the UK.
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More than 250 CEOs of UK tech companies signed a letter to Jeremy Hunt, Britain’s Chancellor of the Exchequer (Minister of the Exchequer), calling for government action, according to a copy seen by Reuters.
“The recent news of SVB’s bankruptcy poses an existential threat to the UK technology sector,” the letter said. “This weekend, most of us as tech founders are going through the numbers to see if we are potentially tech insolvent.”
“Most companies are operating on very thin margins in today’s economy and the contagion from the initial insolvencies will be huge, impacting the economy well beyond the technology sector,” the letter said.
Sky News had reported earlier on Saturday that a UK clearing bank, the Bank of London, was considering a rescue bid for SVB’s UK arm.
The Bank of England said on Friday it was seeking a court order to place SVB UK in insolvency proceedings after US regulators took over parent company SVB Financial Group.
Under UK bank insolvency proceedings, some depositors are eligible for up to £85,000 ($102,000) in compensation for cash held with lenders, or £170,000 for joint accounts.
The UK Department of Science, Innovation and Technology is also in talks with affected technology companies. A further statement will be issued after the talks on Saturday.
Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown, said in an email that there would be aftershocks in the technology sector next week.
“Urgent talks about potential takeovers will be underway, with regulators under pressure to negotiate bailouts to avoid further damaging consequences,” Streeter said.
Reporting by Sarah Young and Elizabeth Howcroft; Edited by Tomasz Janowski and David Holmes
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