The Daily Telegraph

Sunak considers watering down national security takeover rules

- By Matthew Field

RISHI SUNAK, the Prime Minister, is considerin­g relaxing strict national security takeover rules less than two years after they came into force after a slump in deal-making and complaints from China.

Oliver Dowden, the deputy prime minister, has launched a review of the National Security and Investment Act, which came into force in January 2022.

It brought in mandatory reporting for deals in areas such as defence, quantum computing and nuclear power, granting ministers greater powers to investigat­e and block investment­s on national security grounds.

It followed concerns that Britain’s approach to foreign takeovers was too lax, allowing Chinese investors to buy up high-tech UK companies with little scrutiny. A total of 17 deals have been blocked under the regime so far. The Government said in July that more than half of the deals blocked were related to Chinese investment­s.

However, the Government is concerned that the terms of the new regime are too broad. Mr Dowden has launched a consultati­on to reconsider the rules, saying they needed to be “flexible” and “as frictionle­ss as possible”.

Potential changes include removing the requiremen­t to notify officials of internal restructur­es when the ultimate owner of a company remains the same.

Officials will also consider slimming down the number of industries that need to report takeovers to the Government, while potentiall­y adding clearer categories for semiconduc­tors and critical minerals. One area that could be clarified is reporting for artificial intelligen­ce (AI), with officials believing the current requiremen­t is too broad.

The review comes after a slump in deal-making over the past 12 months. The number of mergers and acquisitio­ns involving UK companies fell by 21pc in the first half of 2023, according to PWC, while the value of deals slumped by 55pc. Mr Dowden’s review also follows a rare public complaint from Beijing that the British takeover regime was unfairly targeting China.

China-linked deals made up 42pc of all in-depth reviews under the new Act, despite Chinese investment­s accounting for just 4pc of all notificati­ons.

The tougher regime was welcomed by China-sceptic MPS and one activist warned yesterday any watering down could “open the floodgates for Beijing”.

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