The government has recently published its latest annual report on the operation of the National Security and Investment Act 2021 (NSIA), covering the reporting period from 1 April 2024 to 31 March 2025. This comes at a time of change to the regime, as the government tables proposals to streamline and update the regime’s scope, so that it keeps pace with the modern economy.
In this article, we discuss key trends and takeaways which can be identified from the data in the annual report.
Key trends and takeaways
Notifications are up, but call-in rate remains steady
The report shows that the government reviewed 1,079 notifications – a 27% increase from the previous year. This may reflect the growing awareness of the NSIA, as investors, businesses, and their advisors continue to factor the regime into deal planning and timetabling.
Of the 1,079 notifications, 95.5% were notified that no further action would be taken, and 4.5% (49) were called in. These figures are broadly consistent with the previous year, suggesting that the vast majority of deals notified under the regime do not raise national security issues. This should give investors confidence that, for most transactions, the government is unlikely to intervene on national security grounds.
The government screens for and calls-in non-notified transactions
In addition to the 49 called-in notified transactions, the government called-in 7 non-notified transactions, representing 13% of all called-in transactions. This is a slight increase on the previous reporting period (10%, 4 out of 41). It shows that the government remains proactive in monitoring deal activity and will call in deals on its own initiative if it identifies a potential national security concern.
The impact of NSIA on deal timetables remains consistent
The data indicates that, on average, businesses should allow for up to 36 working days on average for: 1) the government to accept a notification (average: seven working days), and 2) communicate its decision whether to clear or call in a mandatory notification (average: 29 working days). The average time for acceptance of a notification is up to three working days longer for voluntary notifications. All decisions on whether to call in or clear notified acquisitions were taken within the statutory review period of 30 working days. These figures are not materially different from the previous reporting period.
Deals in the defence sector account for the highest proportion of notifications
56% of notifications related to the defence sector, with the wide definition of the sector being a likely contributor. Interestingly, only 36% of called in notifications related to the defence sector, indicating that the regulations may be capturing a broader spectrum of business activity than might be intended, and/or that businesses remain cautious when assessing deals in this sector.
The government is still yet to issue a penalty
During this reporting period, the government identified 60 offences of completing a mandatorily notifiable acquisition without approval. However, it is yet to impose penalties, with businesses instead being required to provide reassurance of steps taken to prevent reoccurrence of non-compliance.
This minimal rate of parties not notifying where required indicates that the primary consequence of not doing so – that the deal is considered void until ratified by the government – may be acting as a sufficient “carrot” for compliance, despite the government not having used its penalty “stick”.
Chinese-based investors remain of primary interest to the government
Although deals associated with UK investors accounted for the largest proportion of notifications (65% of all notifications) and received the largest number of call-in notices (48% of call in notices issued), the statistics point to a notable level of interest from the government in deals associated with Chinese investors: while deals involving Chinese investors accounted for less than 5% of all notifications received, they comprised 32% of all call-in notices issued.
As changes to the NSIA are introduced, it will be interesting to see whether any differences to these trends can be identified in the next annual report.
How can we help
Mills & Reeve’s competition team has extensive experience advising investors and businesses on mandatory, voluntary and retrospective NSIA applications, helping businesses to understand the impact of the regime on the deal timetable and providing guidance on the risk of the deal being called in.
If you have any specific questions or need further guidance, please get in touch with a member of our team.
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