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The UK chancellor is preparing a dramatic intervention next week to provide funding to a range of tech businesses as they seek to manage the damage from the collapse of Silicon Valley Bank.
Jeremy Hunt was looking to “avoid or minimize the damage to some of our most promising companies in the UK”, the Treasury said in a statement at 7.30am on Sunday.
“We will put in place immediate plans to ensure the short-term operating and cash flow needs of Silicon Valley Bank’s UK customers are met,” the Treasury said.
Hunt has rejected the guarantee of the UK arm of SVB and instead focuses on supporting the cash flow of many technology groups with bank deposits. You may struggle to pay wages next week.
The Chancellor is in talks with Bank of England Governor Andrew Bailey and Prime Minister Rishi Sunak about finalizing the plan, which could be implemented as early as Monday.
More than 200 UK-based tech company executives have urged Downing Street to step in, with many companies warning they face “existential risk” from being held by the UK arm of SVB Bank.
Sunac has said he wants to turn Britain into “the next Silicon Valley” and government insiders say he is determined to manage the fallout from the bank’s collapse in the tech sector.
The Bank of England said on Friday that Silicon Valley Bank, following a move by its UK parent company, has limited presence in the UK and does not carry out functions critical to the financial system.
But the Treasury said: “The Government and the bank recognize how serious this is for SVB UK customers and how it will impact cash flow positions, particularly in the short term.”
“The UK has a world-leading technology sector with a dynamic start-up and scale-up ecosystem. The Government recognizes that the failure of SVB will have a significant impact on the technology ecosystem, given the importance of SVB to its customers.”
On Saturday, nearly 210 startup founders and executives signed an open letter to Hunt warning that “many of us as tech founders are running the numbers to see if we’re technically bankrupt.”
The signatories say they have employed more than 10,000 people and raised a total of £3.5bn in venture funding.
“Most of the most exciting and dynamic technology businesses bank with SVB and have no or limited diversification,” the letter said.
“This is a real crisis for British startups,” said Dom Hallas, chief executive of Codec, a lobby group representing UK-based technology companies. “If there is no clear path by Monday, the risk will grow – it is vital that the government has a plan in place by then.”
The letter’s signatories include executives from Tessian, Beemery, Curve and Bit.Bio, companies that have each raised more than $100 million in funding, as well as several smaller groups.
Daniel Shakani, founder of Wages Finance and an investor in a series of companies that have received SVB funding, said: “This is a crisis that requires the involvement of the UK government as it is not clear what the outcome will be for the UK body. SVB US may be orphaned if sold.
Hefzi Pemberton, founder of data consultancy Equality Group, said 90 per cent of the money was blocked by SVB UK. “We’re trying to make payroll for March and it’s going to involve a lot of moving to do that,” she said.
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