Huge relief for tech companies as HSBC announces it will inject £2bn into UK unit of Silicon Valley Bank
HSBC has told tech investors it will inject £2bn of cash into the UK unit of Silicon Valley Bank, in a show of comfort after buying the division for just £1.
Bosses at the banking giant sought to appease start-up heads further in a call yesterday, after they hung the company following all-night crisis talks.
HSBC chief executive Noel Quinn and his UK boss, Ian Stuart, promised they would ensure smooth operations at the failed US bank’s UK branch.
Rescue: HSBC chief executive Noel Quinn (pictured) and UK boss Ian Stuart promised they would ensure operations ran smoothly at SVB’s UK branch
On the call, venture capitalists were told the purchase made strategic sense for HSBC, while Quinn told the BBC yesterday it was ‘too good an opportunity to miss’.
And the start-up founders have described feeling strongly reassured and hugely relieved after a stressful weekend watching SVB crumble across the Atlantic.
Bank customers have now been able to access their accounts and withdraw money after the government and the Bank of England held emergency talks.
The takeover did not involve any taxpayers’ money and will be funded from existing resources, the UK-based HSBC subsidiary said in a statement yesterday.
HSBC is confident the bailout deal will help strengthen its presence in the technology and life sciences sectors.
At the same time, founders and bosses of science, education and space start-ups said they were back to “business as usual” – ending a frantic four days.
Those with cash tied up in SVB UK scrambled on Thursday and Friday to withdraw as much cash as possible to stay afloat.
Some were able to withdraw enough money to stay in business for months, while others couldn’t and reportedly collapsed “almost immediately”.
Sebastian Weidt, chief executive of Universal Quantum, which builds the next generation of computers, said the past 72 hours have been “all a rollercoaster”.
He said: “The UK was in real danger of losing the tech sector which is the future of the economy. If this agreement had not been reached, it would have been a disaster.
Benedikt von Thungen, founder of diagnostics firm Sanome, which works with the NHS, said he breathed a “huge sigh of relief” when the sale was announced.
On Thursday he withdrew three months’ worth of money from the bank to run Sanome, before unsuccessfully trying to withdraw the rest of his money on Friday – when SVB collapsed.
The 37-year-old said the intervention prevented businesses from going bankrupt immediately.
Russ Shaw, founder of Tech London Advocates, said buying HSBC saved Britain’s tech ecosystem from being “decimated”.
However, it is still unclear whether SVB UK would be run as a standalone division or retained under the same brand.
HSBC said the branch had loans of around £5.5bn and deposits of around £6-7bn as of March 10.
Danni Hewson, head of financial analysis at AJ Bell, said “time will really tell the story” in a volatile environment.