After the shocking bankruptcy of a significant US bank, Chancellor Jeremy Hunt warned of a “severe risk” to major British companies.
Since the 2008 financial crisis, Silicon Valley Bank’s failure has been the biggest US bank failure, and it has raised concerns about its potential effects on businesses around the world.
The Bank of England said that after Californian authorities took control of the company this week, the UK division of SVB entered insolvency on Sunday night.
Concerns about the UK’s tech and life science sectors led Mr. Hunt, Prime Minister Rishi Sunak, and the Governor of the Bank of England to hold crisis talks till late Saturday night.
Since then, they have pledged to “minimise” the harm caused by the collapse of SVB to British businesses and have given assurances that there is no “systemic danger” to the financial system of the UK.
The Chancellor also wouldn’t rule out a taxpayer-funded bailout to shield impacted businesses.
“There is a serious risk to our technology and life sciences sectors, many of whom bank with this bank that many people won’t have heard of – Silicon Valley Bank – but it happens to look after the money of some of our most promising and exciting businesses and so I want to reassure people,” Mr Hunt told Sky News’ Sophy Ridge on Sunday show.
“I’ve been in discussions over the weekend, until late last night, with the Prime Minister, the Governor of the Bank of England, many other people.”
“We are working at pace on a solution. We will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff.”
IT companies in Britain have had their accounts frozen as a result of SVB’s failure, which prevents them from accessing their money and preventing them from paying employees.
Significant businesses like Pinterest and Shopify, a leader in online retail, are also negatively impacted.