UK Government to Provide Relief for Tech Startups Impacted by Silicon Valley Bank Closure

UK Government Steps in to Assist Tech Firms Following Silicon Valley Bank Collapse

According to reports, the government is developing a scheme to ensure that UK tech companies affected by Silicon Valley Bank‘s demise won’t run out of money.

The Treasury said it intended to “minimise damage to some of our most promising enterprises in the UK” after the American bank’s bankruptcy last Friday.

The bank was shut down by US regulators on Friday, marking the biggest failure of a US bank since 2008.

UK Tech Firms Get a Lifeline After Silicon Valley Bank’s Demise

From Sunday night, the bank’s UK unit will enter insolvency.

In an effort to find a solution to the failure of Silicon Valley Bank UK, Prime Minister Rishi Sunak, Chancellor Jeremy Hunt, and Governor of the Bank of England Andrew Bailey “were up late last night” and worked all weekend, Mr. Hunt said on Sunday.

Yet, “there is a severe risk to some of our most promising enterprises in technology and medical sciences,” Mr. Hunt told the BBC, adding that there is no risk to the UK financial system as a whole.

“They are really significant businesses for the UK and a very significant component of our future.”

Mr. Hunt added, “We want to find a solution that minimises or prevents all losses to those highly promising [firms],” albeit he could not guarantee that they would get their whole investment back.

He said the government was “working at pace” to bring forward a plan to make sure firms can fulfill their cashflow needs “within the next few days.”

According to him, this proposal will allow businesses to pay their employees. The biggest request we’ve had in the last 24 hours is that.

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In a letter to Mr. Hunt on Saturday, more than 250 CEOs of UK IT companies demanded government action.

According to a tech industry source who spoke to the BBC, “UK tech seems like it may be quite fatal at this point.”

At least 200 businesses that employ tens of thousands of people will discover this Monday that they are unable to pay their employees or suppliers due to the failure of the bank with which they had an account.

The collapse could have a 30% to 40% impact on UK start-ups with up to 50,000 employees, the insider continued.

After failing to raise $2.25 billion (£1.9 billion) to cover a loss from the sale of assets, primarily US government bonds, that were negatively impacted by increased interest rates, SVB failed to survive in the US.

Its problems led to a bank run in the US and raised investor concerns about the overall health of the banking industry.

Over half of the US venture-backed technology and healthcare companies that went public last year had their banking handled by Silicon Valley Bank, a corporation that specialized in lending to early-stage businesses.

The company, which began as a bank in California in 1983, expanded quickly during the previous ten years. It has more than 8,500 employees worldwide, with the majority of its operations being in the US.

Yet, it has come under attack as it becomes more difficult for start-ups to generate money throu gh private fundraising or share sales as a result of rising rates. Client withdrawals increased last week as a result of a trend that started out small.

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Prior to declaring bankruptcy on Sunday, Silicon Valley Bank UK ceased accepting deposits or processing payments.

Individual depositors will now be able to receive payments from the UK’s deposit protection system up to a maximum of £85,000.

Treasury Permanent Secretary Nick Macpherson tweeted that if the government committed to providing any more protection than this, it would pose a “serious moral hazard” because depositors would have no incentive to take precautions against risk if they believed the government would cover all losses in the event of a UK bank failure.

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