The UK economy
The UK government is taking steps to minimize the economic impact of the recent bankruptcy of Silicon Valley Bank (SVB), one of the largest US banks.
Jeremy Hunt said that the government is working at a fast pace to respond to the failure and ensure that there is no systemic contagion risk. Chancellor Rishi Sunak, who was on an official trip to the US at the time, also confirmed that the Treasury has been working through the weekend to find a solution that ensures customers' cash-flow needs.
While SVB has a limited presence in the UK and does not perform functions critical to the financial system, it has been warned that its collapse could have a significant impact on tech start-ups. The Bank of England has already announced that Silicon Valley Bank UK will enter insolvency, following action taken by its parent company in the US. Despite this, both Hunt and Sunak have reassured the public that there is no systemic risk to the UK's financial system.
Instead, the government is working on finding a solution that provides operational liquidity for people's cash flow needs, and is also considering plans to minimize or avoid losses to some of the UK's most promising companies. However, Labour's shadow chancellor Rachel Reeves has urged the government to come forward with specific plans rather than just offering warm words. Tory former chancellor Lord Hammond also added that the UK's tech sector is dynamic and important, and we don't want to see it suffer a massive own goal.
US Treasury Secretary Janet Yellen also confirmed that she is working closely with banking regulators to respond to the collapse and protect depositors. However, she ruled out the possibility of a major bailout, saying that the reforms put in place after the 2008 financial crisis means that they will not do that again. Despite this, Dom Hallas of the Coalition for a Digital Economy (COADEC) believes that the bankruptcy of SVB could have a significant impact on the UK's tech start-up ecosystem.
SVBUK, which is a subsidiary of SVB, was the first location it opened outside the US. The insolvency announcement came after SVB was put under US government control on Friday afternoon, making it the biggest failure of a US bank since the 2008 financial crisis. The Bank of England has said that the company will stop making payments and accepting deposits, but depositors will be paid up to £85,000 from the deposit insurance scheme.