The acquisition of Silicon Valley Bank UK will allow HSBC to expand its presence in the technology industry and further develop its fintech capabilities.
Following the sudden collapse of Silicon Valley Bank in the US, HSBC Holdings sealed the purchase of the UK branch of SVB for £1 ($1.21). The deal, which came after long hours of negotiations involving the UK government, regulators and a consortium of private equity firms, was aimed at saving UK tech startups from impending implosion.
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Cash crisis for UK tech companies
After California-based Silicon Valley Bank could no longer meet withdrawal requests in the US, the possible collapse of SVB UK – which is believed to have around 3,300 UK customers, including startups, companies funded by venture capital and funds – sparked fears for British technology and life. science industries.
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UK tech companies have experienced a bit of a cash crunch, which has prevented some of them from accessing the funds they had in SVB UK. Daily Mail reported that tech companies in the UK, including Pinterest and online retail giant Shopify, have been hit as they struggle to make withdrawals for payroll.
The situation forced the The Bank of England will issue a statement on March 10 on his willingness to ask the court to place SVB UK into bank insolvency proceedings if there was no significant intervention.
However, with HSBC stepping in, tech leaders and startup founders should continue to bank as usual, as all deposits are secure.
“This step has been taken to stabilize SVB UK, ensure the continuity of banking services, minimize disruption to the UK tech sector and support confidence in the financial system,” said the The Bank of England said in a press release after signing the agreement.
“This acquisition makes excellent strategic sense for our UK business,” HSBC Group CEO Noel Quinn said in a statement. “This strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing businesses, including in the technology and life sciences sectors, in the UK and internationally.
“We welcome SVB UK customers to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, knowing that their deposits are backed by the strength, safety and security of HSBC.
How has the UK tech industry been affected?
SVB UK operated as a tech-friendly financial institution, helping with loans and savings for many tech companies in the UK. The economic periodaround 16 technology and life sciences companies in Europe have disclosed more than £156.10 million ($190 million) of exposure to SVB in the UK and US. In the UK, some of these companies were affected before the takeover of HSBC.
Trustpilot Group, a global review platform, has confirmed that the company cannot transfer $18 million of the total funds held in SVB UK. Another technology company, Diaceutics, was unable to withdraw its funds from the bank when news of a potential collapse spread. The situation forced Diaceutics to temporarily suspend transactions on AIM.
Following these events, around 210 companies and startups wrote an open letter to UK Chancellor Jeremy Hunt of the Treasury Department, asking for financial assistance.
The letter was signed by approximately 140 CEOs and founders of well-known brands, including Zoom Video Communications, GitHub, Stripe, DocuSign, Atlassian, Coursera, Slack Technologies, Eventbrite, Fitbit, GoPro, Twilio, Box, Asana, Cloudera, Dropbox and SurveyMonkey – all of whom called for urgent action from the UK government.
What this means for tech leaders in the UK
The UK startup space saw significant growth in tech investment last year, but would have been hit hard had it not been for government intervention. According eWeek, in 2022, the UK ranked second in global startup funding with £12.7 billion ($15.47 billion) in technology investment. The record lifted the UK above China and India, signaling a new wave of digital acceleration that has seen the UK government pledge more financial and regulatory support for the tech industry in the country.
Thanks to the timely intervention of the government, which facilitated the takeover of SVB by HSBC, hope has been restored among the country’s technology investors. Some tech leaders have also reacted to the development. Dom Hallas, Executive Director of the Coalition for a Digital Economy, tweeted that the government’s actions “have saved hundreds of the UK’s most innovative companies”.
“Fantastic news that HSBC will buy SVB UK. A good result that will help the UK tech sector continue to grow. A great relief for many. Daniel Korski, CEO and co-founder of PUBLIC, shared in a Tweeter.
Meanwhile, in the United States, the financial industry and the technology sector are still struggling to fully recover from the collapse of the SVB. A joint effort of the US Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation is tackling the issues at the parent company. Emergency measures have recently been announcement to support banks and reassure depositors about the security of their money.
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