HSBC has acquired Silicon Valley Bank UK for £1 in a historic last-minute deal that will provide a vital lifeline for UK startups.
The deal, facilitated by the Bank of England alongside HM Treasury, will see customer deposits secured and allow customers using the bank to access funds.
In a statement confirming the acquisition, Chancellor Jeremy Hunt said the deal was achieved without taxpayer support and will help restore confidence among startups across the country.
“Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customers' deposits are protected and can bank as normal, with no taxpayer support,” he said.
“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” Hunt added. “I said yesterday that we would look after our tech sector, and we have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence.”
More than 3,000 startups across the country use Silicon Valley Bank’s UK subsidiary. The rapid deterioration of the bank’s finances in recent days sparked widespread panic among firms on both sides of the Atlantic.
SVB's impending failure meant that affected startups would have been unable to pay invoices, distribute payroll funds, and likely face insolvency. An open letter signed by more than 200 startups described the collapse as an “existential threat to the UK tech sector” and called on authorities to provide a last-minute lifeline.
Industry stakeholders have welcomed the rescue deal as a positive move to prevent disruption of the burgeoning UK tech startup ecosystem. Dominic Hallas, executive director of Coadec, the Coalition for a Digital Economy, said the government deserves “huge credit” for facilitating the deal.
“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 saved hundreds of the UK’s most innovative companies today,” he tweeted.
Rob Cossins, CEO at AI-powered data startup Scribe, told IT Pro the acquisition is an “excellent outcome for the UK tech ecosystem”.
“Many UK technology companies were faced with existential risk, so I'm glad that all the relevant stakeholders appreciated the importance of protecting deposit-holders in the UK's most innovative sector,” he said. “Founders that were looking unable to pay wage bills this week are now protected and thousands of jobs have been saved."
What happened to Silicon Valley Bank?
Just one week ago, Silicon Valley Bank was among the largest banking institutions in the United States with a market value of more than $200 billion. By Friday, the bank was spiralling toward liquidation.
SVB was a preferred go-to institution for startups operating in both the US and UK tech sectors, holding cash used for payroll, invoicing, and assorted business expenses.
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SVB’s popularity surged during the pandemic-fuelled startup boom, leading to a rapid influx of deposits that were subsequently invested by the bank. However, the bank invested heavily in US government bonds, including those backed by mortgages.
A steep increase in interest rates in recent months prompted bond values to dip, meaning that the value of the bank’s investment portfolio began to crash. SVB began offloading bonds at a loss, sparking concern among investors and customers alike.
Last week, SVB announced it planned to raise $1.75 billion in capital to compensate for the cashflow gap caused by bond-related losses, prompting a “run” on the bank.
Within a 48-hour period, SVB’s market value dipped rapidly, prompting emergency talks at the US Treasury and Exchequer.
