Investors and businesses are to get greater certainty over whether proposed deals come under the scope of laws designed to protect the UK from predatory investment, foreign interference, and access to sensitive data, according to an announcement from the government.
Under the National Security and Investment Bill, the government seeks to offer businesses and the public in Brexit UK greater protections from foreign investors and those seeking undue influence over certain industrial sectors and technologies. This is a difficult balancing act as the UK relies on international partnerships and foreign direct investments, particularly from markets that could be lucrative for UK innovators, such as China.
It also demands that the UK can define what is and is not a sensitive sector, when market conditions are constantly changing and technologies are always being redefined.
In the frame are sectors such as advanced robotics, along with related areas, such as civil nuclear (power stations and their decommissioning), satellite technologies/space tech, and aerospace/defence – all of which are heavy investors in robotics. The UK’s four robotic research hubs work across many of these applications.
For example, the revised definition of ‘satellite and space technologies’ sets out that deals covering the provision of inter-satellite communications links now come under scope of the Bill.
Emerging technology markets such as quantum technology and synthetic biology are also in the frame of the new legislation, as the law catches up with defining what these innovations could be used for. Under the Bill, investors and businesses will have to notify a dedicated government unit about certain types of transactions in designated sectors. Mandatory notification will ensure that the government is informed of potentially sensitive acquisitions before they happen.
The Bill then allows the government to scrutinise, impose conditions on or, as a last resort, block a deal in any sector where there is an unacceptable risk to Britain’s national security, said the government.
Business Secretary Kwasi Kwarteng explained,
“The National Security and Investment Bill will protect the UK from 21st century threats, to ensure we remain a premier investment hub for the technologies of the future.
“New laws will not only protect the UK from potential risks, but bolster our status as an attractive place to invest by providing more efficient clearance processes and more certainty and transparency for investors and businesses.
“We’re committed to working with investors to ensure the notification process is as quick and smooth as possible – and these carefully targeted sector definitions will give much-needed clarity about whether a deal is in scope.”
Whitehall aims to strike a balance between protecting national security, while keeping to a minimum the number of businesses caught by the mandatory notification regime.
- Although not mentioned directly, a recent context for the legislation is Huawei, the electronics giant which became embroiled in the political and trade standoff between the US and China under President Trump.
A knock-on effect of that was political pressure to begin stripping Huawei hardware out of the UK’s emerging 5G infrastructure, forcing network providers to seek alternative suppliers. Huawei is a massive investor into the UK and employs thousands of people locally, but is regularly cited by tabloids alleging national security risks. In the process, the government admitted that this has set back the UK’s 5G progress by up to two years. But critics of the company have alleged that the move bolsters national security, though no evidence has been found of Huawei passing sensitive data to the Chinese government. All of Huawei’s activities in the UK are monitored by GCHQ and by a dedicated corporate team. However, the debacle has helped put the need to protect sensitive UK markets from foreign powers front and centre of technology policy.
Over the years, a number of UK technology companies have been snapped up by US behemoths, which some have argued makes it harder to grow a domestic technology sector to rival that of Silicon Valley.
The challenge there is that tech companies need access to big, barrier-free markets to grow, and for some start-ups selling out to a larger player is their preferred exit.