Government acts to prevent hostile foreign takeovers

The UK government is introducing a bill that aims to give it powers to investigate and intervene in potentially hostile foreign direct investment that threatens national security.

Under the National Security and Investment Bill, foreign investors and businesses looking to buy British businesses in 17 key industries, such as defence, energy and transport services, will have to notify the Department for Business about their transaction.

Companies that fail to comply could receive fines of up to 5% of worldwide turnover or £10m – whichever is the greater – and face imprisonment for up to five years.

Possible conditions that could be put on deals posing a risk to national security include altering the amount of shares an investor is allowed to acquire, restricting access to commercial information, or controlling access to certain operational sites or works.

The new regime will apply to investors from any country, but will remain targeted and proportionate, so most transactions will be cleared without any intervention, the government said.

Business Secretary Alok Sharma said: “The UK remains one of the most attractive investment destinations in the world and we want to keep it that way. But hostile actors should be in no doubt – there is no back door into the UK.”

Sharma said the bill would mean the UK could continue to welcome job-creating investment to our shores, “while shutting out those who could threaten the safety of the British people”.

The bill extends the Enterprise Act 2002, which allows the UK government to intervene in mergers and takeovers on issues including national security, media plurality and financial stability.

Barring narrow exceptions, the government’s current powers are limited to mergers involving target enterprises with a turnover of £7m or a combined share of supply of 25% or more.

Since 2002, there have only been 12 public interest interventions on national security grounds.

The new bill will allow the government to intervene in smaller acquisitions.

Kevin Ellis, chairman of PricewaterhouseCoopers, said it was vital the UK remained an attractive destination for foreign investment, and that these measures would give investors and businesses certainty and transparency.

“While we shouldn’t underestimate the UK’s attractiveness for investment, competition for foreign direct investment is getting much fiercer,” said Ellis. “Across all industries and markets the bar is being raised and we can’t rely on existing skills, historical relationships or legacy perceptions to drive future success.

“Now more than ever we need to make it easier for that investment to materialise.”