(Bloomberg) — The fallout from the Silicon Valley bank collapse is beginning to ripple around the world.
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The SVB unit in the UK is due to declare bankruptcy, has already ceased trading and is no longer taking on new clients. Startup founders panic about accessing funds and paying employees. On Saturday, the leaders of nearly 180 tech companies sent a letter asking British chancellor Jeremy Hunt to intervene.
“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter, which was seen by Bloomberg. “Many companies will be sent into forced liquidation overnight.”
The UK is just the beginning. SVB has campuses in Canada, China, Denmark, Germany, India, Israel and Sweden as well. The founders warn that a bank failure could wipe out startups around the world without government intervention. SVB’s joint venture in China, SPD Silicon Valley Bank Co., Ltd. , seeks to calm local customers overnight by reminding them that operations were independent and stable.
Read more: SVB’s meltdown is rooted in Treasury bets during the pandemic (1)
“This crisis will start on Monday, so we urge you to prevent it now,” the UK startup founders and executives said in the letter to Hunt. The companies listed in the letter include Uncapped, Apian, Pockit, and Pivotal Earth.
Hunt spoke with the governor of the Bank of England about the situation on Saturday morning, and the Treasury’s economic secretary is due to hold a roundtable with affected businesses later in the day, the Treasury said.
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Highlighting the challenge for governments in dealing with the full extent of the fallout: The UK Treasury has begun canvassing startups, asking them how much deposits they have, their approximate cash burn and their access to banking facilities at SVB and beyond, two people familiar with the matter said. On the matter, they asked not to be identified because the information is not public. The Treasury Department declined to comment on the survey.
Uncapped, a financial technology startup that lends to other startups, said it is launching an emergency funding program to help companies meet payroll and other obligations, as well as long-term loans to help with working capital.
Read more: Silicon Valley Bank: Investor, Lender, Networker of Startups
UK start-up association Coadec said on Twitter that “panic” was starting to set in as it was clear that the collapse of SVB “could have a significant impact on the UK tech startup ecosystem.” The group said it was working with “Treasury and No. 10 on potential impact” and “work continued overnight on policy options”.
Alexander Fitzgerald, founder of broadband startup Cuckoo and former Treasury official, noted that the financial resources of British startups have already been depleted due to the slowdown in the venture capital financing market. “British start-ups need the Treasury to step in quickly,” he said.
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