Life sciences' relief over SVB UK rescue but fears remain
13 Mar 2023
Ailing Silicon Valley Bank’s British arm has been acquired by HSBC in an eleventh hour deal that has caused a collective sigh of relief among thousands of UK life science and other start-ups.
More than 3,000 firms were estimated to have close to £7billion from investors lodged with the company. Until the purchase by HSBC, SVB UK was set to be placed into insolvency by the Bank of England.
The Government moved fast to act after widespread fears of serious disruption to the sciences sector, not long after Prime Minister had reiterated his wish to make life sciences a core part of Britain’s economic recovery and growth – an intention signalled by the unveiling of the new Science Cabinet portfolio in the recent mini-reshuffle.
But SVB’s troubles had raised the prospect of innovative companies losing deposits of investor money essential for their early stage development and even survival, a scenario raised in an open letter to Chancellor Jeremy Hunt at the weekend that was signed by more than 200 business chiefs.
Raymond Berglund, Managing Director for Alvarez & Marsal’s European Healthcare & Life Sciences practice, outlined the challenge:
"Silicon Valley Bank, as well as a number of the non-SIB institutions have grown in size significantly since the 2008 global finance crisis. These banking institutions are highly integrated into the venture capital market and, more recently, have held significant stakes in the cryptocurrency space.”
“A global bank that is favoured by the venture capital and ‘emerging innovation’ sector that fails as quickly as SVB creates grave concern about how the many start-ups across all industries will make payroll and fund their operations.”
The crisis appears to have been precipitated among tech companies investing with SVB UK’s US parent. Economic pressures had affected funding levels, leaving many keen to access their holdings and causing the bank in turn to seek emergency financing
CEO and Co-Founder of Calculus, John Glencross, commended Downing Street for the speed of its actions.
He commented: “The speed of the response by the Treasury shows the importance it places on the UK technology and healthcare sectors and their contribution to the economy. … Rishi Sunak reinforced this, stating he will always be on the side of entrepreneurs and innovators. The UK venture capital, start up and scaleup community should feel reassured by the outcome.”
However, Berglund added a further warning that the rescue of SVB UK did not eradicate the wider problem of financial exposure among many financial operations.
“Despite HSBC’s acquisition to rescue the UK arm of SVB, the bank and its overall exposure is similar to many other non-SIB institutions globally, and we are not likely seeing the end of banking failures at this point,” he cautioned.
The SVB crisis has already impacted the City of London, with the FTSE 100 recording its biggest losses for eight months.