UK government proposes crackdown on takeover deals that threaten national security

Proposals aim to ‘close loopholes’ to enable greater scrutiny of foreign investment

The UK government is proposing more say over deals in its military and technology sectors, as it seeks to intervene in mergers and takeovers when it believes they threaten national security. At present, the government can only intervene when proposed mergers involve companies whose turnover is above £70m or where the effective market share of the combined business would hit 25 per cent or more.

If enacted, the Government could lower the threshold whereby ministers can scrutinise investment to businesses with a UK turnover of more than £1m, and remove the 25 per cent requirement.

Earlier today, the government published a Green Paper entitled: “National Security and Investment and Infrastructure Review” and is seeking views to amend the Enterprise Act. According to Reuters, the consultation is seeking opinion on how the government can best ensure that investments and takeovers do not raise national security concerns, and notes that openness to trade in the UK needs to come with “safeguards”.

The proposals aim to “close these loopholes” to enable “greater scrutiny of foreign investment in a changing market”.

Business, Energy and Industrial Strategy Secretary, Greg Clark, today spoke about how Britain has always been the foremost advocate of free trade.

“It is right that every so often the Government reviews its mergers regime to close loopholes where they arise and this is what these proposals do in the area of national security. No part of the economy is off-limits to foreign investment and the UK will continue to be a vociferous advocate for free trade and a magnet for global talent,” Clark added.

This proposal marks a significant shift for a country which has traditionally been one of the most open to foreign buyout deals. Media reports suggest that these security concerns have been fuelled by a string of acquisitions by Chinese companies across the world. The weakening of the pound since Britain’s vote to leave the European Union has also made UK companies cheaper for foreign buyers.

The second part of the consultation will focus on potential long-term reforms to ensure that investments and takeovers do not raise national security concerns.