The government has developed plans for an emergency funding lifeline to assist companies affected by the collapse of Silicon Valley Bank UK (SVB UK) and its parent company, which has shocked the UK IT industry.
In order to prevent more controversy, Chancellor Jeremy Hunt has labeled the problem a "high priority" and has been meeting with the Prime Minister and the Governor of the Bank of England late at night. Although the UK financial system is not at systemic risk, there is a "severe risk" to the technology and life sciences sectors, which include many of SVB UK's clients.
The government has requested certain information from the impacted startups, including their monthly burn rate, cash on deposit with SVB UK, and whether they have access to other bank accounts. There are hopes that the government will explore either reviving SVB UK through a state bailout or private acquisition or issuing specialized loans for startups at risk of failing. Representatives from the tech industry have been summoned for an emergency meeting with Treasury officials.
With only £85,000 of client deposits being covered by the Financial Services Compensation Scheme, the failure of Silicon Valley Bank, the 16th largest lender in the US, has put numerous businesses at danger of losing practically all of their capital.
The UK tech sector might be severely harmed by this, as many companies run the risk of going out of business over night. Barclays and Lloyds Banking Group are only two of the lenders that the board of SVB UK has contacted in an effort to save the company from collapse. They have been given a 24-hour deadline to act.
Although there is little probability of a banking sector-wide outbreak, investors and digital companies are concerned about the sector's wider repercussions.
The UK's startup sector, which propels growth and innovation throughout the economy, is under threat, and the shadow chancellor, Rachel Reeves, has urged the government to take quick action to protect it. It's unclear what actions the government will take to stop more harm at this important time for the UK digital sector.
