About 210 start-up company founders and leaders in the UK have signed a letter to Chancellor Jeremy Hunt, warning that they could face insolvency after the collapse of Silicon Valley Bank in the United States and the subsequent bankruptcy of its UK operation.
“The majority of us as tech founders are running numbers to see if we are potentially technically insolvent”, the letter said, according to sources.
The signatories said they employ more than 10,000 people and have raised venture funding totalling £3.5 billon.
“The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held,” the letter said, according to the FT.
Calling on Mr Hunt to intervene, the letter also said: “The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” according to Bloomberg.
“Many businesses will be sent into involuntary liquidation overnight.”
Cashflow concerns
Mr Hunt has spoken to the governor of the Bank of England about the collapse of SVB and there are talks with some British high-tech companies that might be affected, according to the UK Treasury.
Treasury officials and those from the Bank of England are working together, a statement from the Treasury said, adding that a junior finance minister will discuss the concerns of some UK tech firms with industry representatives on Saturday.
“The government recognises that tech sector companies are often not cashflow positive as they grow, and that they rely on cash on deposits to cover their day-to-day costs,” the statement said.
Silicon Valley Bank became the biggest US lender to fail in more than a decade on Friday, following an unsuccessful attempt to raise capital and a run on the bank as depositors tried to withdraw funds.
Meanwhile, eligible depositors in the British arm of SVB would be paid by the UK’s deposit-insurance fund, the Bank of England said on Friday.
Deposits are insured up to £85,000 ($102,000) or £170,000 for joint accounts, the Bank of England said.
“SVB UK has a limited presence in the UK and no critical functions supporting the financial system,” the Bank said.
“In the interim, the firm will stop making payments or accepting deposits.”
Sky News reported on Saturday that the Bank of London, which describes itself as “a leading-edge technology company and the world's first purpose-built global clearing, agency and transaction bank”, is considering a rescue bid for the UK arm of SVB.
The Bank of London did not comment on the rumour.
