UK Startups Face Uncertainty as SVB continues to collapse

UK Startups Face Uncertainty as SVB continues to collapse

written by John Murphy | March 13, 2023

Silicon Valley Bank continues to collapse after going through the old-school liquidity crisis this has ultimately taken a toll on the British extension of the bank as well.

Last year in August the extension of SVB in the UK was flipped to an independent subsidiary bank.

All the investors and startups are in trouble as they face the financial crisis after the collapse of the Bank. They are looking up to their government for help and pulling them out of it.

The Silicon Valley Bank is directly under the authority of UK regulators. According to the annual report for 2022, the bank received £100 million worth of investments from various startups.

The stance of BOE on SVB collapse

After the SVB underwent a crisis, The Bank of England BOE made a statement in which it declared the bank as the least significant financial body present, this turned out to be a contrasting statement to how the investors view the Silicon Valley bank. They consider the collapse of SVP a national crisis for all investors.

In light of recent events, the BOE decided to put the UK subsidiary into insolvency. They made this decision in conjunction with the UK finance ministry.

In addition, declaring insolvency will result in the cessation of both deposit-taking and payment-making processes at the bank.

According to The Guardian, industry representatives were scheduled to meet with Andrew Griffith, the City minister, on Saturday afternoon. The UK Treasury, as reported by The Guardian, issued a statement regarding this meeting.

“The government recognises that tech sector companies are often not cash flow positive as they grow, and that they rely on cash on deposits to cover their day to day costs.” 

The CEO Startups are not taking this well

The CEOs of various companies are not taking this decision well. Moreover, CEOs of around 130 companies have sent a letter to the UK chancellor Jeremy Hunt, urging the govt to intervene.

They called out the Bank of England for being ignorant and lacking knowledge of its role in the economy. Furthermore, they even criticized its judgment on the limited impact of SVB on The economy of the UK.

The CEOs specifically mentioned in the letter that SVB’s recent insolvency represents an existential threat to the UK tech sector. This view was also shared by Coadec, a nonprofit organization that advocates for policies supporting digital startups in the UK, which noted that multiple companies and investors have substantial exposure to SVB UK.

On the contrary, according to a report from Sky News, although they are uncertain about the news, The Bank of London is perhaps considering a bid for SVB UK. Now The crucial issue at present is whether the UK government can lessen the effects of SVB’s insolvency. Also if they can prevent companies affected by it from being liquidated involuntarily.

the UK’s reaction to the crisis could have implications worldwide, given that SVB has branches in numerous countries, such as China, India, Denmark, Canada, and Sweden. As a result, the world is watching closely to see how the UK will respond.