In a significant move for the stability of UK tech, HSBC has stepped in to purchase the UK arm of the crisis-ridden Silicon Valley Bank

It comes after a weekend of crisis for the country’s tech sector after  the Silicon Valley Bank was  closed by UK regulators last Friday, leading to stark warnings for the potential consequences for British banks. 

The deal secures the deposits of Silicon Valley Bank’s UK arm, with HSBC paying a mere £1 to secure the stability of deposits within the bank. 

Speaking to Sky News, Chancellor Jeremy Hunt stated: “A number of our most promising and important technology and life science companies had their money with Silicon Valley Bank in the UK branch.

“When you have very young companies, very promising companies, they’re also fragile. They need to pay their staff. And they were worried that as of 8:00 this morning, they might literally not be able to access their bank accounts.”

Hunt went on to map out just how fragile the situation was, as he added: “Some of them only had bank accounts with Silicon Valley Bank UK. And so for that reason, we were faced with a situation where we could have seen some of our most important companies, our most strategic companies wiped out, and that would have been extremely dangerous.”

In spite of HSBC stepping in to save the UK arm of the Silicon Valley Bank, the widespread consequences of the tech space’s collapse could still be significant. 

When the news broke on Friday, Tal Kirschenbaum, CEO and Co-Founder of Ledge detailed what he believes companies need to be aware of in order to minimise their risk and exposure. 

“SVB is widely regarded as one of the bedrocks of the tech world, having contributed significantly to the growth of the tech ecosystem. This is a challenging time for the tech industry, even for those companies that have not been directly affected by the recent developments. 

“The situation presents a number of first and second order implications that companies need to be aware of in order to minimize their own risk and exposure. Fintech companies, for example, that rely on SVB for their core business and have built their product on top of SVB’s payment rails, using their payment rails to move funds, might face significant limits on their ability to operate. 

“This will have ripple effects across the ecosystem, affecting mission-critical services like payroll vendors, accounts payable or accounts receivable automation, working capital solutions, and health insurance vendors.” 

“In light of these developments, companies, even those who don’t bank with SVB should take action to minimize their risk and exposure. Companies should assess their mission-critical services to better understand the implications of SVB on their operations. They should act quickly to identify any providers that rely on SVB and ensure that they are still able to operate and support their operations and services. 

“Companies that still hold funds in SVB should also start compiling evidence to back up their positions and assets. This will be essential as the FDIC process begins on Monday. In addition, companies who hold funds with SVB should seek to augment their cash flow as an interim solution.

“It is critical that companies act fast to address these challenges and minimize their exposure to risk.”

The warnings come as market turbulence off the back of the collapse has shown few signs of slowing on a global scale as the ripple effect takes hold and increases strain on global financial markets.