British businesses will not suffer fallout from the collapse of a leading tech-focussed bank, Rishi Sunak has promised as the Treasury scrambles to avoid a City crisis.
Silicon Valley Bank (SVB), which is heavily involved in financing start-up firms, was shut down in the US on Friday and its British arm is being wound up over the weekend.
The collapse has prompted fears that businesses will be unable to draw on their reserves, potentially forcing them in turn to shut down.
But speaking as he travelled to San Diego, California for a summit with the leaders of the US and Australia, the Prime Minister dismissed the suggestion there was a “systemic contagion risk” from SVB.
Mr Sunak told reporters: “We’re working to recognize the anxiety and the concerns customers of the bank have and making sure we can work to find a solution that secures people’s operational liquidity and cash-flow needs. And that’s what the Treasury is working on.”
He added: “We’re working through it, the Treasury is in touch, I’ve been in touch… we don’t believe that there is a systemic risk in the UK. Lots of different things they are looking at. Just rest assured they’re working through it over the weekend.”
The Prime Minister insisted that the UK’s financial regulation regime, overseen by the Bank of England‘s embattled Governor Andrew Bailey, was fit for purpose.
It comes after Chancellor Jeremy Hunt said on Sunday morning that the government was “working at pace” to limit the damage of the bank’s collapse.
He told Sky’s Sophy Ridge on Sunday programme that he had held talks with Mr Sunak and Mr Bailey “until late last night” to find a solution, and that they were “absolutely determined” to protect businesses.
Mr Hunt said: “The Bank of England has made it very clear there is no systemic risk to our financial system, so people should be reassured on that basis.
“But there is a serious risk to our technology and life sciences sectors. It happens to look after the money of some of our most promising and exciting businesses.”
Mr Hunt added that the Treasury will “bring forward very soon plans to make sure people are able to meet their cashflow requirements”.
Labour urged the government to offer more than “warm words” to the UK companies affected by the collapse of SVB.
“I am slightly concerned about the urgency that you heard from the chancellor there because when markets open tomorrow morning, a lot of businesses in the UK are not going to be clear about how they can pay the wages of their staff and whether their deposits with Silicon Valley Bank and their financing arrangements are still in place,” she told Sky News.
“I would urge the government to do more than offer warm words, but come forward with specific plans.”