Authorities in the United Kingdom are considering a possible bailout for tech firms after the collapse of the British branch of the Silicon Valley Bank.
Jeremy Hunt, the Chancellor of the Exchequer, is reportedly mulling a possible bailout for tech firms and startups affected by the collapse of the Silicon Valley Bank UK, a subsidiary of America’s Silicon Valley Bank (SVB).
The failure of SVB represents the second-largest failure of a bank in U.S. history, only beaten out by the collapse of Washington Mutuals during the 2008 financial crisis.
According to a report by the BBC, there is now significant fear about the knock-on effect the bank’s collapse could have on startups in Britain, with many firms set to lose large sums of money after the Bank of England declared that SVB UK would enter insolvency on Friday.
As a result, the Treasury is now reportedly aiming to offset the damage done by the bank’s collapse, with Hunt telling the public broadcaster that authorities are considering various ways of rescuing the tech firms affected.
One such rescue plan even involves providing an emergency cash lifeline for companies hit by SVB going under.
“We want to find a way that minimises or avoids all losses to those incredibly promising [firms],” the Chancellor said, arguing that while the impact on the United Kingdom’s overall economy is expected to be minimal, SVB’s collapse would nevertheless risk wiping out many of the country’s budding tech enterprises.
Meanwhile, the Treasury is reportedly putting plans in place to meet the immediate needs of the firms affected by the crisis, with a statement made early Sunday morning emphasising that the entire British government were taking the matter seriously.
“The government is treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend,” the statement read.
“The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met,” they added.
SVB’s collapse has left many working within the realms of tech and venture capital in shock, with the bank seemingly going from a rock-steady financial institution to a car wreck in a matter of days.
The bank’s collapse has also reportedly left many major tech companies in the lurch, with some major multinationals having bank balances numbering in the hundreds of millions within SVB at the time it went under.
There also appears to be some fears that SVB may not be the end of the story, with Reuters reporting European bank stocks falling amid fears regarding the crisis.
“The market is treating this as a potential contagion risk,” one strategist explained. “It makes sense to me that a remote probability of a U.S. banking system-wide crisis should also come with a small probability of contagion to Europe.”