Dozens of early-stage tech companies in the UK have warned the chancellor of “an existential threat” to the sector following the failure of Silicon Valley Bank in the US.
The Bank of England has said it is seeking a court order to place SVB UK into an insolvency procedure, after US regulators took over its parent company on Friday.
The Treasury and the Bank of England are trying to minimise the disruption that could stem from a collapse of the UK arm of the bank.
But, in a letter addressed to Chancellor Jeremy Hunt, more than 250 tech firm chief executives have been quick to voice their concerns.
The letter, first reported by Sky News City editor Mark Kleinman, said: “The recent news about SVB going into insolvency represents an existential threat to the UK tech sector.
“This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.”
The letter said that 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”.
It added: “Most businesses are operating on very fine margins in the current economy and the contagion from the initial insolvencies will be vast and impact the economy far beyond the tech sector.”
‘Significant impact on the UK’s tech start-up ecosystem’
The feelings were echoed by the Coalition for a Digital Economy (Coadec), a non-profit campaigning for policies to support digital start-ups.
Coadec’s executive director, Dom Hallas, said: “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.”
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Bank of London may bid for SVB
Treasury: UK’s banking system remains strong and resilient
The Treasury has insisted that Britain’s banking system remains strong and resilient, adding that issues affecting Silicon Valley Bank are specific to it and don’t have implications for other banks in the UK.
Mr Hallas said discussions with the Treasury will continue today, adding: “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.”
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Possible salvage bid?
Meanwhile the Bank Of London has declined to comment on a report that it was weighing bids to salvage the British arm of SVB.
Sky News reported that the clearing bank, launched just two years ago, was considering an offer, although it was unclear how credible this would be, given its own fledgling status.
The Bank of London recently raised funds at a valuation of over $1bn.