Blockbuster deals such as the takeover of British chip giant Arm face potential hold-ups as ministers set out tougher rules for foreign investment.
In the biggest shake-up of takeover powers for two decades, the Government will today lay the proposed National Security and Investment Bill before Parliament.
It will require firms to disclose deals that could pose a security threat to Britain, covering critical infrastructure such as nuclear power and satellites as well as cutting-edge technology such as artificial intelligence and microchips.
Takeover The National Security and Investment Bill before Parliament will require firms to disclose deals that could pose a security threat to Britain
Those who fail to do so could face hefty fines and criminal charges. Any deals due to complete from today onwards will be open to intervention.
But the Government will enforce the rules after the bill has cleared Parliament, creating a limbo period for businesses in the coming months.
It is understood that firms seeking clarity on whether their transactions will fall under the new laws can ring an official hotline, although they will only be able to get limited assurances without a full probe being carried out.
The situation is likely to create uncertainty for major deals currently under consideration, from US giant Nvidia’s planned £30billion takeover of Arm to the potential buyout of security firm G4S, a government contractor at prisons and nuclear power stations.
Other deals involving potentially sensitive firms could also face hold-ups. A City source said: ‘This would give me pause for thought. If you are a buyer you need certainty and anything that brings uncertainty is a negative.’
The new investment regime will cover all deals involving assets and intellectual property, meaning even relatively small transactions could be deemed a risk.
The proposals are a victory for the Daily Mail, which has long campaigned to reform Britain’s lax takeover laws and highlighted fears over the sales of defence contractors GKN and Cobham, and satellite firm Inmarsat.
It will be seen as a shot across the bows to China as concern grows about Beijing’s plans to acquire and militarise a growing list of technologies.
Last night 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.
‘This bill will mean that we can continue to welcome job-creating investment, while shutting out those who could threaten the safety of the British people.’
The proposals are set to be the biggest shake-up of foreign investment laws since the Enterprise Act 2002, giving ministers much more sweeping powers to challenge deals.
At present, deals can only be blocked if the Competition and Markets Authority decides they would lead to a loss of competition, by creating an entity with more than 25 per cent of a market or turnover of over £70million.
Ministers can also step in on grounds of national security, financial stability or media plurality, but the laws would broaden the scope and require companies in critical sectors to tell officials about relevant deals.
At the moment only a few transactions a year are looked at but it is understood the rules would lead to some 1,000 or more being flagged up, with 70 to 95 getting a full-blown security vetting and about 10 requiring intervention.
The overhaul comes after months of criticism over Chinese telecoms giant Huawei’s involvement in Britain’s 5G network. It was later banned under rules that take effect in 2027.
We must protect ourselves from hostile forces
by Alok Sharma BUSINESS SECRETARY
Screening regime: Business Secretary Alok Sharma
As we unshackle ourselves from EU rule, and continue to fight coronavirus, we want to strengthen our position as one of the most attractive places in the world to do business, so we welcome the vast majority of foreign direct investment.
In just ten years, investment from overseas has created more than 600,000 jobs in Britain, benefiting every corner of the country.
But we must also be clear that under no circumstances will we allow deals to be made that compromise this country’s national security or the safety of our citizens. That is why today I am introducing new laws to shore up our fortifications against malicious investment – upgrading powers which are nearly 20 years old – as some of our closest allies such as the US and Australia have done.
This is a critical issue, that I know the Daily Mail – the UK’s leading crusading newspaper – has been campaigning on for some time. In recent years, a small minority of hostile forces has been using increasingly novel means to undermine British interests. For example, acquiring sensitive assets such as a business’s ideas or intellectual property.
As they grow wilier, we in turn need to make our defences stronger.
New laws will mean investors and businesses will have to tell government about proposed deals in sensitive sectors, such as defence.
As Business Secretary, I can also ‘call in’ any transaction in any sector that could threaten our safety, to ensure no dodgy deal can slip through the net. Most transactions will be unaffected by these powers.
We want to keep vital finance flowing from trusted sources – to keep improving productivity, to keep generating new jobs for Brits. But to do that we need a screening regime that is fit for purpose.
WE need a regime which provides certainty and transparency by working to clear timelines and making administrative procedures smooth.
A pro-investment, pro-security regime allows us to open our arms wide to embrace new, creative investment, while firmly turning the lock on those looking to sneak in and do us harm.
The National Security and Investment Bill will shine a spotlight on any deal that raises a national security risk.
My message to those hostile forces is this: there is no back door into the UK.