Britain takes on the foreign buyout barons: New rules can block swoops on vital firms that could harm Britain’s national security
A string of high profile buyouts of UK companies could be in doubt as government powers to block foreign takeovers come into force today.
The National Security and Investment (NSI) Act, the biggest shake-up of the UK’s foreign investment regime for two decades, will allow ministers to scrutinise acquisitions that could harm Britain’s national security.
The Government must now investigate deals in 17 sensitive industries including energy, artificial intelligence, nuclear, space and advanced robotics.
New powers: The National Security and Investment Act will allow ministers to scrutinise acquisitions that could harm Britain’s national security
But the law’s scope is not limited to these sectors. It also gives ministers the power to intervene in takeovers of any size or make binding commitments if any deals could infringe on national security.
‘The UK is world-renowned as an attractive place to invest but we have always been clear that we will not hesitate to step in where necessary to protect our national security,’ said Business Secretary Kwasi Kwarteng.
The introduction of the NSI Act follows a wave of overseas swoops last year that set off major alarm bells.
Ministers have been criticised for years for lax controls on foreign takeovers, which have seen major buyouts waved through without even a raised eyebrow from Whitehall.
Under the Enterprise Act of 2002, ministers are able to intervene and the Business Secretary able to block or impose restrictions.
However, the only two companies the Government is able to automatically veto an investment or takeover in are BAE Systems and Rolls-Royce, in which it has a so-called ‘golden share’.
All ultimate decisions under the NSI Act will still be made by the Secretary of State.
A Whitehall source described the NSI Act as a ‘significant upgrade to government powers’.
Critics, however, have slammed the Act as a blow to post-Brexit Britain. The law has also concerned bankers in the City of London, who raked in billions in fees last year for helping push deals through.
But the NSI Act brings the UK in line with, rather than in conflict with, many of the measures already in place in other countries.
Intervention: Business secretary Kwasi Kwarteng (pictured) says the new powers will help protect firms that service the Royal Navy
Lord Heseltine, who was a defence minister under Margaret Thatcher and who has opposed the UK’s foreign takeover regime, said: ‘I’ve long called for such a process. There is no doubt we have been too lax in the past.’
The introduction of the law follows a number of defence and aerospace deals that showed the Enterprise Act was unfit for purpose.
The two watershed takeovers were the £8billion buyout of GKN by Melrose in 2018 and the £4billion pounce on Cobham by private equity group Advent.
Since the pandemic, the £2.6billion move on Ultra Electronics by Advent, Cobham’s buyer, brought the issue of national security back to the fore.
Ultra makes cutting-edge sonobuoys that can detect enemy submarines – critical technology that if lost could put the very defence of the nation in jeopardy, many argued.
Soon after, Parker-Hannifin, an American rival, put forward a £6.3billion bid for another defence group Meggitt.
Kwarteng swiftly opened investigations into these two takeovers after protests, but under the NSI Act this would have been automatic.
The move on semiconductor giant ARM Holdings – which is owned by Japan’s Softbank – by American rival Nvidia could be called in for investigation under the Act, as could American group Viasat’s move on Inmarsat.
Although these are both already owned by foreign or private equity firms, this would not preclude an investigation into each new deal.