Treasury Made Early Hours Scramble To Avert Tech Crisis With Silicon Valley Bank Deal
Chancellor Jeremy Hunt on the BBC (Alamy)
It wasn't until the early hours of Monday morning that the government was able to get an emergency deal with HSBC over the line to rescue UK branch of the collapsed US-based Silicon Valley Bank (SVB).
Crunch talks followed "wall-to-wall" meetings over the weekend, with Prime Minister Rishi Sunak dialling in from his flight to San Diego where he is due to meet with Australian and US leaders, as warnings mounted of disastrous consequences for the UK tech industry.
The US bank, which specialises in lending money to start-up tech firms, was closed down by US regulators on Friday, sending ripples of panic throughout the global financial industry. Its collapse represented the biggest failure of a US bank since the financial crisis of 2008 and the UK stood to be directly impacted, with a host of tech firms in Britain having major deposits with SVB.
On Monday the Treasury and the Bank of England (BoE) were able to oversee a deal between HSBC and SVB's UK operation that involves no tax payer money and protects deposits of its customers.
Chancellor Jeremy Hunt said that the Treasury had successfully facilitated an agreement which will see HSBC buy the UK arm of SVB for £1, rescuing hundreds of UK tech companies using the bank from significant losses that could have translated to mass job cuts.
"I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise," Hunt said in a tweet.
Hunt and his team realised on Saturday that a major intervention would be needed to protect the UK tech industry from a crisis on a potentially existential scale.
They were warned that as early as Monday morning tech businesses with deposits in the bank, many of which are newer firms with little or no profit, would be hit with "very real issues" if no action was taken, like being unable to pay their staff and suppliers. The bank has just over 3,000 customers in the UK, according to the BBC.
The meetings continued throughout Sunday, with PM Rishi Sunak dialling in from his flight to California.
The BoE was clear from the outset that the shock collapse of SVB across the Atlantic posed no risk to the UK's wider financial system, PoliticsHome understands.
However, it was made clear to them that it was dangerous threat to the tech sector, which Sunak himself cares deeply about and has put at the very heart of his economic agenda, having set up the new Department for Science, Innovation and Technology and vowed to turn the UK into a tech "superpower" by 2030.
The government considered a number of options, with a private sale always being the preference.
But it wasn't until the early hours of Monday morning, hours before the markets opened, that the Treasury and BoE signed off the HSBC deal. In the hours leading up to the breakthrough, officials were carrying out work on a potential plan B, in the event of the sale collapsing.
The sale of SVB to HSBC was broadly welcomed by UK businesses set to be affected by the collapse.
“The sale of Silicon Valley Bank in the UK to HSBC is welcome news," Michael Moore, Director General of the British Private Equity & Venture Capital Association (BVCA), told The Times. Confidence should return to markets and the affected businesses with an orderly transition and access to the cash frozen over the weekend.”
Labour's shadow chancellor Rachel Reeves, who had called for the government to urgently intervene to support UK tech businesses by Monday, also welcomed the move.
"That SVB has a buyer will be a relief to the entrepreneurs and the thousands of people working in the tech and start-up sectors, who woke up facing huge uncertainty this morning," she said.
"Tech and life sciences are vital to getting our economy growing again."
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