UK technology firms have cheered the sale of Silicon Valley Bank UK (SVB UK) to HSBC after warning that about a third of the nation’s tech sector could have been lost if the bank collapsed.
An influential tech group said anxiety levels were “off the scale” for many start-ups in the hours of intense negotiations leading up to the rescue deal.
Russ Shaw, the founder of Tech London Advocates, told the PA news agency that well over 100 tech leaders and investors were working with the Government, the Treasury, the Bank of England and tech firms over the weekend to demonstrate the magnitude of the problem.
He told PA: “We were trying to gather information, pass it to the Government to say, the size and scale of this is going to be big.
“The Prime Minister has said he wants the UK to be a science and tech powerhouse, but if we don’t get this sorted by Monday, we are going to probably lose about a third of our tech sector as a result of this one bank closure.
“So it was significant and I think we felt like we were staring into the abyss.”
It comes after the US government moved to stop a potential banking crisis after SBV failed, marking the second-largest bank failure in history.
Mr Shaw said the smallest firms still had about £25,000 with SVB UK, but he was in touch with one start-up that had more than £10 million of exposure to the bank.
Some firms had all their money with the flailing bank, he stressed, which led to high levels of anxiety amid the impending insolvency.
“We estimated that probably several thousand UK start-ups were going to be impacted by this, so it was big.”
But Mr Shaw said the sector “breathed a collective sigh of relief” when it was confirmed that HSBC would acquire the assets of SVB UK and banking services would continue as normal.
Dom Hallas, the executive director of the Coalition for a Digital Economy (Coadec) which represents UK scale-ups, was one of the tech leaders working closely with the Government over the weekend.
Mr Hallas echoed the sentiment of Mr Shaw that the sale comes as a big relief for concerned businesses whose deposits were at risk.
He said: “The Government deserves huge credit from the very top, to HM Treasury who understood the challenge and gripped it, to the huge number of civil servants who have likely not slept since Friday.
“It’s glib to say it – but there are hundreds of founders around the country who will thank you for your work.”
The Government deserves huge credit. From the very top, to HM Treasury who understood the challenge and gripped it, to the PRA, to the huge number of civil servants who have likely not slept since Friday. They have saved hundreds of the UK’s most innovative companies today.
— Dom Hallas (@Dom_Hallas) March 13, 2023
It is understood there were a number of banks interested in buying SVB UK, but that ultimately HSBC won the deal.
Mr Shaw added: “HSBC just acquired an incredible portfolio of businesses, frankly, who are all very healthy. It’s not like they were distressed – the issue is that they couldn’t access their funds.
“Suddenly, in one fell swoop, HSBC have acquired a number of great, high-growth, scaling businesses. It feels like it is a win-win.”
Meanwhile, numerous venture capitalist funds also held money with SVB, particularly in the US where the bank was a major lender for the tech industry.
Konstantin Sidorov, the chief executive of the London Technology Club, told PA that the rescue deal marked a “pivotal moment” for the UK as a major global tech and science hub.
He said: “It is thanks to the Government that it reacted quickly and understood the importance of the bank’s role in the industry. It is an amazing sign that it is very, very serious about supporting the industry.
“I think it would have been impossible for the Government to say we support tech, and we are doing everything we can for the sector, and then just destroying what they had built over the years.”
He added that the move will have given investors confidence after a “very nervous weekend” for the sector.
