Second Annual Report on the National Security and Investment Act

The Cabinet Office has published the second Annual Report on the National Security and Investment Act 2021 (NSIA), covering the period from 1 April 2022 to 31 March 2023 (the Report).

The NSIA introduced a new framework for the review of transactions and investments on national security grounds in the UK with effect from 4 January 2022, updating the UK regime in line with the global trend to strengthen foreign direct investment screening.

The NSIA requires the Secretary of State to present a report on the operation of the regime to Parliament each year. The first report, published on 16 June 2022, provided a limited overview of the first three months of the NSIA’s operation. The latest Report covers the full 12-month period to 31 March 2023 and offers valuable insights for investors into the work of the newly established Investment Security Unit in enforcing the NSIA regime, including:

• Notifications – There were 866 notifications received in the relevant period, of which 671 were mandatory filings, 180 were voluntary notifications, and 15 were retrospective validation applications. The vast majority (93%) were cleared within the initial 30 working day preliminary review period.
• “Call-ins” – 65 transactions were “called-in” for further investigation by the Secretary of State. Over half of the call-ins related to mandatory filings, and around one quarter were in relation to voluntary notifications. Importantly, 10 non-notified transactions were called-in during the review period, illustrating that the Government is pro-actively monitoring deal activity and making use of its powers to call-in transactions for review on its own initiative.
• Outcomes – 72 called-in transactions were subject to final determination by the Secretary of State during the relevant period (with 11 transactions being withdrawn before the end of the review process). Most of the called-in transactions eventually received unconditional clearance, with only 20.8% resulting in a final order. There were 15 final orders issued by the Secretary of State during the review period (one of which was subsequently revoked due to the acquirer deciding not to proceed with the transaction). Five of these resulted in prohibition or forced divestment of the acquisition, with the rest involving the imposition of conditions.

Read a more detailed summary of the Report, including key practical takeaways for investors, on our competition team’s blog here.