Silicon Valley Bank’s UK customers could need taxpayer rescue

BRITISH customers of collapsed lender Silicon Valley Bank could be bailed out by the taxpayer amid fears that a swathe of tech start-ups face being wiped out by the crisis.

Chancellor Jeremy Hunt – just days away from delivering his first Budget – was yesterday scrambling to contain the fallout among hundreds of firms, some of which have millions parked with the bank.

Last night, a consortium led by The Bank of London – a lender founded just two years ago – submitted a formal rescue bid for SVB’s UK arm.

Officials were racing to try to announce a formal response as soon as possible with markets watching closely as they reopen this morning.

Mr Hunt said the Government would bring forward immediate plans to help firms meet their cashflow needs. Taxpayer help for customers was among the options being considered by the Government with the state-backed British Business Bank and Innovate UK agency potentially involved.

One industry insider estimated hundreds of millions of pounds could be needed to tide over the companies affected in the short term.

Advisers at finance group Rothschild have been appointed to seek an emergency takeover of Silicon Valley Bank’s UK arm and have reportedly approached larger banks including Barclays and Lloyds about a rescue.

Last night it emerged that OakNorth, founded by former Tory donor Rishi Khosla, was in talks over a deal.

Mr Hunt said UK tech companies faced a ‘serious risk’ from the collapse of the bank and the Government had been ‘working at pace’ on a solution.

Bank of England Governor Andrew Bailey and Rishi Sunak have also been in talks over the crisis over the weekend. Mr Sunak said the Government did not ‘believe there is a systemic contagion risk’.

Russ Shaw, founder of industry body Tech London Advocates, said Mr Hunt’s statement yesterday morning was encouraging news for the 40 per cent of tech start-ups estimated to have banked with SVB’s UK arm.

The crisis has left many frozen out of accessing funds. Mr Shaw said that among them was an IT services provider for the NHS. ‘Trying to provide the near-term liquidity to get this back on track might require some taxpayer funding,’ he added.

The crisis began late last week when the finances of California-based Silicon Valley Bank, America’s 16th biggest lender, began to unravel leading to its demise on Friday.

SVB’s UK subsidiary tried to reassure customers by making clear that it was a separate entity. But that was not enough to prevent billions of pounds reportedly being withdrawn.

Bank deposits of up to £85,000 are protected but many businesses will hold much more in their accounts.