Over the weekend, alarm bells were ringing for the UK’s tech sector as Silicon Valley Bank UK (SVB UK) officially collapsed on 10 March. As of last Friday, SVB UK was the 16th largest bank, worth more than $200bn. In a sudden turn of events, HSBC swooped in to save the day, buying out the bank for just a symbolic £1.

Why does this matter?

The initial news of the collapse could have been catastrophic. SVB UK was one of the most important financial institutions across the tech and startup community in the UK and the US. Both Venture Capital firms and businesses used it as their banking partner in the UK and it also directly invested in scaleups. SVB UK had nearly £7bn in deposits when the Bank of England deemed it insolvent on Friday.

Estimates vary but it’s suggested between 30-50% of tech startups and scaleups had some form of relationship with SVBUK.

At 7am Monday SVB UK was acquired by HSBC. There is still little detail available but the key is that all deposits will be protected and businesses; customers of SVB UK will be able to access these from today.

Saving the day

This rescue deal has adverted a huge crisis, as HSBC summarises in its statement:

Silicon Valley Bank (UK) Ltd has today been sold to HSBC. HSBC is headquartered in London, is the largest bank in Europe and is one of the world’s largest banking and financial services institutions, serving 39 million customers globally. Customers of SVB UK will be able to access their deposits and banking services as normal from today.

This transaction has been facilitated by the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009.  No taxpayer money is involved, and customer deposits have been protected.

Making use of post-crisis banking reforms, which introduced powers to safely manage the failure of banks, this sale has protected both the customers of SVB UK and taxpayers. The UK has a world leading tech sector, with a dynamic start-up and scale-up ecosystem and the government is pleased that a private sector purchaser has been found.

HSBC said a final calculation of the gain from the acquisition would be provided in due course and that it would be funded from its existing resources.

The UK government was heavily involved in facilitating the deal, wanting to avoid government interference. In reaction to the news, Chancellor Jeremy Hunt said:

“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs. 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.

“Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have reached a resolution in such short order.

“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”

Whilst more information is yet to come, one thing is for certain, the tech sector adverted a potentially huge crisis for now. However, the demise of SVB still ignites concerns for the technology sector. SVB supported startups and scaleups that more traditional banks may shy away from. As we continue through these times of economic uncertainty, a key tech supporter has collapsed, which will likely have widespread consequences for the pace of innovation and development within the community.  

Shona Wright

Shona covers all things editorial at TechSPARK. She publishes news articles, interviews and features about our fantastic tech and digital ecosystem, working with startups and scaleups to spread the word about the cool things they're up to. She also oversees TechSPARK's social media, sharing the latest updates on everything from investment news to green tech meetups and inspirational stories.