In order to find a solution to the collapse of Silicon Valley Bank, Prime Minister Rishi Sunak, Chancellor Jeremy Hunt, and Governor of the Bank of England Andrew Bailey “were up late yesterday (11 March) night” and have been “working through the weekend.”
While there’s no risk to the UK’s financial system as a whole, “there is a serious risk to some of our most promising companies in technology and life sciences”, Mr Hunt told the BBC.
“These are very important companies to the UK, a very important part of our future.”
“We want to find a way that minimizes or avoids all losses to those incredibly promising [firms],” Mr Hunt said, although he said he could not commit to companies recovering all of their money.
He said the government was “working at pace” to bring forward a plan to make sure firms can meet their cashflow needs “within the next few days”.
That plan will mean companies can pay their staff, he said. “That’s the big ask we’ve had in the last 24 hours.”
More than 250 bosses of UK tech firms signed a letter addressed to Mr Hunt on Saturday calling for government intervention.
One source in a tech firm told the BBC: “It all feels like it could be pretty terminal for UK tech.”
“This Monday, at least 200 firms employing tens of thousands of people will find they can’t pay their staff or suppliers because the bank they had an account with has gone bust,” the source said.
Between 30% and 40% or UK start-ups employing up to 50,000 people could be affected by the collapse, the source added.
SVB collapsed in the US after failing to raise to raise $2.25bn (£1.9bn) to plug a loss from the sale of assets, mainly US government bonds, that were affected by higher interest rates.
Its troubles prompted a run on the bank in the US and sparked investor fears about the general state of the banking sector.
Silicon Valley Bank specialised in lending to early-stage businesses, and the company banked nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.
The firm, which started as a California bank in 1983, expanded rapidly over the last decade. It employs more than 8,500 people globally, with most of its operations in the US.
But it has been under pressure as higher rates make it harder for start-ups to raise money through private fundraising or share sales. More clients were withdrawing deposits in a trend that snowballed last week.
Silicon Valley Bank UK has stopped making payments or accepting deposits prior to going into insolvency from Sunday.
The move will allow individual depositors to be paid up to £85,000 from the UK’s deposit insurance scheme.
However, the government committing to protecting any more than this would be a “serious moral hazard”, Treasury permanent secretary Nick Macpherson tweeted – that is, depositors would lack an incentive to guard against risk if they expected the government to fully pay out in any UK bank collapse.