Sunak says no risk of UK contagion from Silicon Valley Bank collapse

The bank manages the money of some of Britain's most promising businesses, UK Chancellor says

The locked door of a Silicon Valley Bank branch in Menlo Park, California. Reuters

Prime Minister Rishi Sunak has insisted there is no contagion risk to UK banks after the collapse of Silicon Valley Bank, as the government works “at pace” to find a way to ring-fence Britain's technology and life sciences industries.

“We don’t believe there is a systemic contagion risk," Mr Sunak said on Sunday on a flight to the US.

“We’re working to recognise the anxiety and the concerns customers of the bank have and making sure we can work to find a solution that secures people’s operational liquidity and cash-flow needs.”

Asked if the Treasury was likely to come up with a solution by the time the London markets open on Monday morning, Mr Sunak replied: “The Treasury is working at pace.”

He said that any talk of the UK setting up an emergency fund to bail out bank customers was “speculation".

The UK government is trying to limit the damage to British tech companies resulting from the chaos engulfing the UK arm of California-based SVB.

Mr Sunak's comments came after UK Chancellor Jeremy Hunt said Britain's technology and life sciences sectors were at “serious risk” after its closure.

The lender, which was closed by US authorities on Friday, manages the money of some of the UK's most promising businesses, Mr Hunt said.

“There is a serious risk to our technology and life sciences sectors, many of whom bank with this bank," he told Sky News.

“Most people won't have heard of the Silicon Valley Bank but it happens to look after the money of some of our most promising and exciting businesses.”

The bank is expected to reopen on Monday under a new name with the US deposit guarantee agency, the FDIC, taking control.

Mr Hunt said the Governor of the Bank of England made it “very clear” that there was no systemic risk to the UK's financial system from SVB's collapse.

The government would bring forward plans “very soon” to ensure people are able to meet their cashflow requirements and pay staff, he said.

It would also put a longer-term solution in place to minimise or completely avoid losses to British companies, Mr Hunt said.

A survey of 31 venture capital funds, which hold thousands of investments in UK tech and science firms, found that 34 per cent of their portfolio companies, or 336 have accounts with the bank.

More than 200 of those now face short or long-term cashflow risk, according to the data from BVCA, which is the industry body representing venture capital investors.

About £2.5 billion ($3.02 billion) of capital from these firms is locked in the lender.

The Bank of England ordered its UK subsidiary into insolvency from Sunday night.

Banking giants HSBC and JP Morgan were among several parties looking at buying the bank’s British operations, Sky News reported. Both declined to comment.

Oaknorth Bank, a business lender founded by former Conservatives donor Rishi Khosla, was also in takeover talks, the PA news agency understands.

There was also interest from The Bank of London and Abu Dhabi state-backed investment vehicle ADQ, Sky reported.

Discussions were understood to be going on into the evening as officials rushed to find a buyer before the insolvency deadline.