Ministers are close to publishing a long-awaited national security and investment bill, aiming to tighten the rules governing foreign investment across Britain’s critical infrastructure and parts of its defence industries.
The proposals emerge at a time of heightened political concern about Chinese ownership in key parts of the economy – while the coronavirus pandemic has also revealed dependencies on foreign suppliers for critical goods.
A bill had been promised in December’s Queen’s speech and sources indicated it could be published and given its first reading later this week, with a view to a second reading in the Commons the week after.
Official briefing notes at the time said it would contain “powers to mitigate risks to national security – by adding conditions to a transaction or blocking the transaction as a last resort.”
At present only a relatively small number of takeovers can be called in and potentially blocked on national security grounds, and the British system is used sparingly compared with other countries, in particular the US.
A growing number of Conservative backbenchers want the rules to make it harder for Chinese companies to buy strategic British firms – after they successfully forced the government to drop Huawei from 5G mobile networks after 2027.
Last month, Iain Duncan Smith called for a full review of Chinese ownership in the UK, highlighting the country’s leading supplier of blood plasma as an example. Rebel MPs are also focused on the UK’s programme of new nuclear reactors, where China General Nuclear wants to build a reactor in Bradwell, Essex.
Previously ministers have indicated they want to be able to call in a change of control up to six months after it was originally notified, doubling the existing time limit, expand the definition of change of control to as low as 25% and introduce a range of sanctions for non-compliance.
The Department for Business, Energy and Industrial Strategy had also been studying whether sanctions could be applied retrospectively, forcing divestments after takeovers have already been concluded if security concerns emerge, but it was not immediately clear if this was part of the bill.
The existing rules were drawn up in the early days of the last Labour government in 2002, when Tony’s Blair’s administration was keen to introduce a laissez-faire regime, and the current government says fresh primary legislation is needed.
There were some incremental revisions in 2018, expanding the remit to cover takeovers in the areas of dual-use military technology, computer hardware and quantum technology.