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Better late than never

A new law came into force this month that gives the government wide-ranging new powers to prevent foreign takeovers of UK companies, or strategic stakes of 25 per cent or more. The National Security and Investment Act (NSIA) applies to sensitive sectors ranging from advanced materials to artificial intelligence, civil nuclear, ‘critical suppliers to government’, data infrastructure, defence, and ‘synthetic biology’.

Parliament has finally acted to protect UK interests

The NSIA creates a new Government authority, to be known as the Investment and Security Unit (ISU). The aim of ISU is to be the custodian of National Security interests under threat from potential share acquisitions and other deals, such as purchases of assets, including intellectual property (IP).

NSIA will catch ‘notifiable acquisitions’ with a mandatory notification being required for certain transactions and voluntary notification for others. There is no financial lower limit or threshold for a transaction in order for NSIA to take effect.

The ISU will sit within the existing Business, Energy & Industrial Strategy Department. Therefore, the Business Secretary (currently Kwasi Kwarteng) will be ultimately responsible for the exercise of the powers of the ISU. This is proposed to include a five-year retrospective call-in power on transactions that fall under the NSIA.

According to Alok Sharma, the former business secretary who introduced the bill in 2020, it was a message to ‘hostile actors’ – by which he meant mainly state-connected Chinese firms – ‘that there is no back door to the UK’.

The US and EU have already moved towards the kind of protectionism the Act represents. The Third Way think-tank has been warning about foreign takeovers of companies central to the UK national interest – from technology to infrastructure for years.

Allowing Huawei into our telecoms infrastructure and China General Nuclear into Hinkley Point was an embarrassing mistake for our government. Allowing foreigners to snap up smaller UK technology and life-science ventures at an early stage in their development will prove a costly error. Still, better late than never.

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