The collapse of SVB Bank prompts British politicians to plan
British Finance Minister Jeremy Hunt promised quick liquidity support for start-ups in Great Britain hit by the collapse of Silicon Valley Bank (SVB) on Sunday. “The crisis poses a serious risk to our technology and life sciences companies,” Hunt told Sky News. The government will do everything to ensure that companies pay their employees and meet their liquidity obligations.
The finance minister also opened the form in which the subsidy will be given and whether taxpayers’ money will be used for it. It is not only about short-term cash flow support but also a long-term solution. “This is about the most promising companies in our economy,” Hunt emphasized. British Prime Minister Rishi Sunak has placed the promotion of start-ups at the center of his economic policy under the motto “A Nation of Innovation”. The Prime Minister recently announced that she wants to make Great Britain “the next Silicon Valley”.
However, government aid in Great Britain has become politically sensitive since the 2008 financial crisis. At the time, the government bailed out ailing banks from bankruptcy with billions in bailouts, leading to widespread criticism.
The SVB crisis has led to serious fears of liquidity constraints in the British start-up scene. In a public letter to British Treasury Secretary Jeremy Hunt over the weekend, founders and entrepreneurs of more than 200 young tech companies in London called for government intervention. “Loss of deposits could cripple the sector and set the ecosystem back by 20 years,” the letter says, “sending many companies into involuntary liquidation overnight.” The companies involved are said to employ around 10,000 people in the UK.
Hunt said he had been in crunch talks with Prime Minister Chung and Fed chief Andrew Bailey since the weekend. The Bank of England (BoE) introduced the resolution of SVB’s UK arm on Friday, but stressed that “SVB UK has only a small presence in the UK and has no core functions for the financial system”.
The start-up’s founders contradicted this in their public letter: “The Bank of England’s assessment that SVB’s bankruptcy would have only a limited impact on the British economy shows a dangerous understanding of the sector and its role in the overall economy, today and in the future,” according to reports in British media. .
SVB UK is said to employ around 650 people in London, but handles the accounts of thousands of business clients. Under UK insolvency law, deposits with SVB are protected by a government shield of up to £85,000. However, payments can take up to seven days, leading to severe cash flow constraints for many companies.
Torsten Ricke, London
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