Cabinet Office publishes report on the National Security and Investment Act 2021 regime

The NSIA increased the Government’s powers to scrutinise certain acquisitions and investments on national security grounds, replacing narrower powers in the Enterprise Act 2022. Under the regime set out in the NSIA, where control or influence of a qualifying entity or qualifying asset is gained in circumstances considered to pose a risk to national security, the Government (acting through the Investment Security Unit (“ISU”)) has the power to review and potentially intervene in the transaction.  See our overview of the National Security And Investment Act 2021 for further background on the regime introduced by the NSIA.

Key findings in the Report include:

• During the reporting period, the Government received 906 notifications, an increase from 865 received during the previous reporting period which ran from 1 April 2022 to 31 March 2023 (previous reporting period).
• Of the 906 notifications received, 735 were mandatory notifications, 120 were voluntary notifications and 33 were retrospective validation applications.
• Of the 906 notifications received, the Government accepted 876, an increase from 806 in the previous reporting period. 24 notifications were rejected, a decrease from 42 during the previous reporting period.
• The 876 notifications accepted comprised 728 mandatory notifications, 116 voluntary notifications and 32 retrospective notifications.
• During the reporting period 41 call-in notices were issued. Under the NSIA regime, a call-in notice is issued when the Government calls in an acquisition for further scrutiny if they reasonably suspect a qualifying acquisition may give rise to a risk to national security. Of the call-in notices 22 related to mandatory notifications, 15 related to voluntary notifications and 4 were in relation to non-notified acquisitions. This is a decrease on the 65 call-in notices issued during the previous reporting period. Of these called in acquisitions, 41% related to acquisitions involving acquirers associated with China, 39% with acquirers associated with the UK and 22% with the US. China was also associated with the highest proportion of call-in notices during the previous reporting period (42%). 
• The Government issued 33 final notifications and 5 final orders and varied 2 other final orders during the reporting period. This contrasts with 57 final notifications and 15 final orders during the previous reporting period. Under the NSIA regime, a final notification is a called in acquisition in which no further action will be taken after the assessment period, and a final order is a legally binding document imposing conditions on an acquisition to mitigate national security risks. Of the 33 final notifications, 18 were following a mandatory notification, 12 were following a voluntary notification and 3 for non-notified acquisitions. 48% of the final notifications involved acquirers associated with China, 42% with the UK and 21% with the US. China was also associated with the highest proportion of final notifications issued during the previous reporting period (40%). 
• Of the 5 final orders, 3 were following a mandatory notification, 1 following a voluntary notification and another was for a non-notified acquisition. 
• The highest proportion of accepted and rejected notification related to the defence sector of the economy (48% of notifications), this was followed by critical suppliers to government (19%) and military and dual use (17%).
• The highest proportion of called-in acquisitions were also in the defence sector (34%) and military and dual use (29%). In addition, acquisitions in the areas of academic research and development in higher education, advanced materials and communications each accounted for 24% of call-in notices during the reporting period. In contrast, in the previous reporting period, the highest proportion of call-in notices issued related to the military and dual use sector with 37%.
• 30% of the final notifications issued during the reporting period were associated with acquisitions in the defence sector of the economy, and academic research and development in higher education, advanced materials and military and dual-use areas of the economy each accounted for 24% of final notifications. By comparison, in the previous reporting period the highest proportion of final notifications were associated with the military and dual use sector with 44%.
• Of the 5 final orders made during the reporting period, 4 were associated with acquisitions in the defence sector of the economy, 2 related to military and dual-use and 2 related to communications. In the previous reporting period, the largest number of final orders were in the military and dual-use area of the economy (5).
• In the reporting period, 61% of accepted notifications related to acquirers associated with the UK (this contrasts with 57% during the previous reporting period), and 26% with acquirers associated with the US.  Acquirers associated with France, Germany and Luxembourg each accounted for 4% of notifications. 
• On average, it took 6 working days to accept a mandatory notification and 8 working days to accept a voluntary notification. Of the 24 notifications that were rejected, it took on average 13 working days to reject mandatory notifications and 15 working days to reject voluntary notifications.
• All accepted notifications were either called in or cleared within the statutory time limit of 30 working days during the review period. For notifications that were called in, it took on average 29 statutory working days to issue a call-in notice once a mandatory or voluntary notification was accepted.
• On average it took 26 statutory working days or 48 calendar days to issue a final notification from the point an acquisition was called in during the assessment period. In the previous reporting period, the average number of statutory working days between calling in an acquisition and issuing a final notification was 26 working days.
• During the reporting period no financial assistance was given, no penalties were issued, and no criminal prosecutions were concluded.  (Although 34 offences of completing a notifiable acquisition without approval were identified by the Government, parties were contacted to request that steps were taken to prevent any recurrence).