The Treasury is racing to minimise the fallout from the collapse of Silicon Valley Bank for the British tech sector.

Chancellor Jeremy Hunt said in a statement on Sunday morning that the Government was “working at speed” and would escalate plans to help customers caught up in the bank failure.

"The Government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK,” Mr Hunt said, adding: “We will bring forward immediate plans to ensure the short term operational and cash flow needs of Silicon Valley Bank UK customers are able to be met.”

Hundreds of tech firms have been affected by the insolvency, sparked by parent company Silicon Valley Bank in the US collapsing in the largest bank failure since the financial crisis.

Tech bosses are worried they will be unable to pay salaries and could find themselves without any cash in the short term.

Customers’ deposits are only protected up to £85,000, with many firms scrambling to seek emergency funding from investors.

Mr Hunt said the Government was “treating this issue as a high priority” and that discussions with the Governor of the Bank of England and the Prime Minister were ongoing over the weekend.

He said: “The Government recognises that, given the importance of Silicon Valley Bank to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem."

The Bank of England on Friday said that Silicon Valley Bank had a limited presence in the UK and was not systemically critical.

In response, around 200 tech companies signed a letter on Saturday warning of the ramifications threatening thousands of jobs.

Mr Hunt acknowledged this in his statement, saying: “The government and the Bank understand the level of concern that this raises for customers of Silicon Valley Bank UK, and especially how it may impact on cash flow positions in the short term.”

Silicon Valley Bank was the 16th largest lender in the US. Regulators on Friday moved to seize its assets as the bank collapsed.

It had been trying to raise funding to cover a £1.7bn shortfall after a large increase in withdrawals from tech customers whose funding was drying up.