TheCityUK response to the government’s call for evidence on the operation of the National Security and Investment Act

We have responded to the government’s call for evidence on the operation of the National Security and Investment (NSI) Act. We are seeking improvements to the UK’s investment screening process to ensure that the Act focusses on transactions that pose national security risks and provides a smoother environment for the vast majority of transactions that do not pose such risks.

The NSI Act Annual Report 2022-23 notes that 866 notifications were received in total. Although this is lower than the number anticipated when the Act was being developed, just 65 (about 7.5%) of the notified acquisitions reviewed by the ISU were called in for further assessment. We would note that the 866 notifications under the UK regime is double the number received by the Committee on Foreign Investment in the United States, which received 440 filings, despite an economy approximately eight times smaller than the US economy. This disparity underlines the opportunity to make improvements to support further productive FDI.

Our key recommendations to the call for evidence are:

• We welcome proposals to refine the mandatory sectors and we do not think the scope of the regime should be broadened further.
• We welcome the proposals to exempt certain types of transactions from mandatory notification requirements – such as internal reorganisations where ultimate beneficial ownership remains unchanged. We would continue to urge the government to go further in considering more streamlined notification and/or clearance process or exemptions for well-known UK institutional investors, investors from key UK allies, or other well-known repeat acquirors.
• The government should consider how it might develop a risk-based triaging process. Such a process should be able to filter for higher and lower risk acquisitions, with a fast-tracked review process to get lower risk deals processed through the system more quickly, for example by setting a new target of 10 working days for these acquisitions.

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