The sudden and unexpected news of the UK-based arm of Silicon Valley Bank (SVB) closing its doors has left the financial and tech world in a state of shock. The U.S. based banking institution opened its first UK office in 2013, and only a decade later, it will now be winding down operations, leaving many UK startups and venture capitalists scrambling for an alternative.
This closure comes as a surprise to most, and the UK government is now rapidly mobilizing to help and support those affected by SVB’s decision. The bank had made a major impact on the British tech scene over its seven years in the country, and its absence could be potentially disastrous to the ecosystem, especially considering the current economic crisis caused by the pandemic.
The government is taking immediate steps to reduce the likelihood of an SVB-shaped hole in the tech sector. A surge of new investments and stimulus packages have been announced, with the aim of helping existing startups secure funding and encouraging new enterprises in the wake of SVB’s shuttering.
Given the reliance of the UK tech industry on SVB’s financing and network, it is not certain how much of an impact the government-led aid will have. It is also not clear how many potential startups will now avoid UK shores as a result of SVB’s departure.
Meanwhile, existing startups are already bracing for the worst as they grapple with the uncertainty of finding a new financial partner. Many have already started looking for alternative financing sources or lenders in the hope of securing the necessary support to continue operations.
Rippling throughout the tech industry, the shutdown of SVB’s UK arm has brought into light the vulnerability of the sector. Although there may be available support to startups in the short-term, the uncertain nature of the financial sector means that long-term security is not guaranteed.
The impact that SVB’s closure has had on the tech sector is yet to be seen. However, the government’s quick action demonstrates just how vital startups are to the UK economy and suggests that the crisis created by the SVB contagion could become a catalyst for the growth of the industry rather than its detriment.