The UK chancellor is preparing a dramatic intervention to provide a lifeline to scores of tech businesses as he seeks to contain the damage caused by the collapse of Silicon Valley Bank.

Jeremy Hunt said on Sunday there was “a serious risk” to tech and life sciences companies that used SVB’s UK bank, with senior founders warning of “carnage” if they are unable to pay wages and bills in the coming week.

The government spent the weekend racing to try to sell SVB UK and put together a backup plan to support the companies who have had deposits trapped in the ailing lender. Hours after US regulators shuttered California-based SVB on Friday, in the country’s biggest bank failure since 2008, the Bank of England announced it would have to put the group’s separate UK banking unit into insolvency, sparking the weekend sales process.

Hunt has ruled out a bailout of the UK arm of SVB and is instead focusing on keeping cash flowing to tech groups. If a buyer cannot be secured, government officials and regulators are working on a rescue plan to provide guarantees for banks to offer new loans to companies with money locked in SVB accounts.

The scheme will be overseen by the state-backed British Business Bank, according to multiple people familiar with the talks. The Financial Conduct Authority has spoken to banks about taking part in the scheme, according to one person familiar with the discussions, and has told them they can take on clients quickly without fulfilling the usual rules on customer due diligence since those clients will have already passed SVB’s onboarding processes, which the FCA has reviewed and did not find any issues with.

However, government officials said that scheme was not finalised and a number of details had to be thrashed before markets opened on Monday morning. “There are a wide range of options being looked at,” said one Treasury insider, adding that a sale of the UK bank would be the preferred outcome.

Several people familiar with the the government’s attempts to broker a sale said that a Middle Eastern buyer was one of the leading bidders, in a move reminiscent of rescues after the 2008 financial crisis.

SVB UK has 3,300 UK clients, including start-ups, venture backed companies and funds, according to people familiar with the bank, although many have deposits under the £85,000 threshold covered by the financial insurance scheme. The UK government said in December that the country was home to “over 85,000 startups and scale-ups”.

Asked if he would guarantee 100 per cent of deposits, Hunt told the BBC’s Laura Kuenssberg: “We want to find a way that minimises — or if we possibly can — avoids all losses to these incredibly promising companies.”

Meanwhile Rishi Sunak, prime minister, repeated the Bank of England’s assertion that the collapse of SVB’s UK bank did not present “a systemic contagion risk”.

But he told reporters ahead of a UK, US and Australia defence summit: “We’re working to recognise 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.”

He said the Treasury was working “at pace” to deliver a plan. Asked if he was satisfied BoE governor Andrew Bailey was overseeing a robust regulatory environment for UK banks, Sunak replied: “Yes.”

Hunt said he had held talks with Bailey and Sunak late into Saturday. He wants to have a final plan in place by as soon as Monday.

Tech companies, many of which tried to pull their money out on Friday, risk losing their deposits above £85,000 if SVB is put into the BoE’s resolution regime.

Hundreds of UK-based tech executives and investors have urged Downing Street to step in, warning that many companies faced an “existential threat” because they banked with the UK unit of SVB.

Sunak says he wants to turn Britain into “the next Silicon Valley” and is said by government insiders to be determined to contain the fallout for the tech sector from the bank’s collapse.

On Saturday, more than 200 start-up founders and leaders signed an open letter to Hunt, warning that “the majority of us as tech founders are running numbers to see if we are potentially technically insolvent”. By Sunday the number had risen to more than 300, with signatories saying they employed more than 15,000 people and had raised venture funding totalling £5.5bn.

A separate group of at least 30 venture capital funds with a presence in the UK also pledged their support for SVB, were it to be rescued, including Accel, Sequoia Capital, Index Ventures, Atomico, LocalGlobe and General Catalyst.

“In the event that SVB-UK were to be purchased and appropriately capitalised, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them,” the VCs said.

Many UK start-ups banked with SVB because it offered debt to early stage companies that traditional lenders would not. The terms of these loan agreements often included a requirement to keep cash on deposit with SVB. Some venture capitalists argue that there are fewer alternatives to SVB in the UK than in the US.

“This is a real moment of crisis for British start-ups,” said Dom Hallas, executive director of Coadec, a lobby group representing UK-based tech companies. “Without a clear way forward by Monday the risk will grow — it’s critical that government has a plan in place by then.”

Reporting by George Parker, Daniel Thomas, Tim Bradshaw, Laura Noonan, Stephen Morris, Ivan Livingstone and Anjli Raval