National Security and Investment Act: first Annual Report published

The UK Government has published its first Annual Report on the functioning of the recently implemented National Security and Investment regime, which gives the Government the power to scrutinise certain acquisitions and investments from a national security perspective.

On 16 June 2022, the Department for Business, Energy & Industrial Strategy (BEIS) published its first Annual Report (Report) under the recently implemented National Security and Investment Act (NSIA).  For further details on the NSIA please see our earlier publications National Security and Investment Act: Time to act now and UK National Security and Investment - now is the time to Act.

The Report covers the period from commencement of the NSIA, on 4 January 2022 until 31 March 2022.  It therefore provides a helpful, if somewhat limited, glimpse into how the NSIA regime has been working in its early months.

In the accompanying press release to the Report, Business Secretary Kwasi Kwarteng stated that the Report “shows our new investment screening process is working. It’s simple and quick, giving firms speed and certainty to do business in a way that protects the security of the UK.”

Details contained in the Report give an overview of notifications made until 31 March, by both number and sector.  Key takeaways from the Report are:

  • There have been over 200 notifications made to the Investment Security Unit (ISU), the majority of which have been mandatory notifications.
  • The ISU has already established a good track record of accepting notifications as complete quickly, so as to start the statutory 30 working day review period, typically coming well within a week.
  • Decisions on whether or not to call-in or clear a transaction are routinely being made within the 30 working day period, with a median of 24 working days.
  • As at 31 March, there have been a total of 17 call-in notices given, 13 of which were off the back of a mandatory notification.  While as a matter of course call-in notices will not be made public, BEIS recently announced that it was reviewing Nexperia’s acquisition of Newport Wafer Fab (see here) and the acquisition by Altice of 6% of shares in BT (see here).
  • The five most common areas for mandatory notifications have been: Defence, Military and Dual Use, Critical Suppliers to Government, Artificial Intelligence and Data Infrastructure.

For the most part, the Report reflects Hogan Lovells’ practical experience of the NSIA regime.  Prior to the NSIA regime going fully live on 4 January 2022, and while going through parliamentary approval, the Government performed an Impact Assessment to estimate the volume of notifications it expected to receive (1,000 to 1,830 per year) and call-in notices it expected to issue (70 to 95 per year). 

While the Report notes that it is still too early to draw conclusions based on only three months of data, the above figures may suggest that the new regime (at least initially) is proving to be less burdensome than anticipated.  Another possible factor cited in the Report is “a noticeable decline in mergers and acquisitions (M&A) activity” in the final quarter of 2021, reflecting a surge in the COVID Omicron variant.

How we can help

Our advice to clients is to factor in the NSIA regime at the outset of their due diligence when considering how it will impact their acquisitions and investments.  The question is to determine what impact the regime has or will have, and to understand whether a notification will be required or is advisable.

Please get in touch with us to discuss the impact that the NSIA regime could have on your business.  Hogan Lovells practises law at the intersection between business and Government and is particularly well placed to help – having a deep understanding of the regulatory landscape and the detail of the NSIA regime.  We also have extensive experience of working inside Government, and advising corporations on the machinery of Government and its policy priorities.  Let us help you navigate the new regime and, if necessary, engage with Government and relevant stakeholders.



Authored by Christopher Peacock, Christopher Hutton, Robert Gardener, and Matt Giles.

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