UK government tables proposals to update its investment screening regime

The government plans to streamline the investment screening regime as part of a wider move to ease the regulatory burden on investors and businesses.

Background

The National Security and Investment Act 2021 (NSIA) established the UK’s investment screening regime. It gives the UK government powers to scrutinise and intervene in certain investments, acquisitions and asset deals to protect national security.

In line with its “Plan for Change” and its aim to create a business-friendly environment to foster inward investment, the government has proposed several changes to the NSIA regime. The changes focus on refining the scope of the mandatory notification regime by reducing the types of transaction and streamlining those sensitive sectors of the economy which currently require mandatory notification prior to closing.

The changes are intended to help the regime to keep pace with the modern economy and reduce the red tape for businesses, facilitating investment while maintaining robust protections of national security.

In this article, we outline the proposed changes and their potential impact.

Planned reforms

Narrowing the scope of transactions requiring mandatory notification

The government plans to remove the mandatory notification requirements for certain types of internal reorganisations and the appointment of liquidators, special administrators and official receivers.
While there is no public data showing the number of such transactions which are notified, the government has commented that that these transactions rarely present risk. It is therefore hoped that the change will free up time to focus more closely on higher-risk transactions. More information is expected as the government develops the detail of these changes.

Streamlining the NSIA sectors

Building on the conclusions of a previous consultation on the operation of the NSIA regime, the government is planning the following changes to update the 17 sensitive sectors of the economy, which are subject to mandatory notification requirements. These changes are intended to ensure that the NSIA regime applies in a targeted and proportionate way, while also improving clarity:

1. Creating new standalone mandatory areas for critical minerals and semiconductors (the latter incorporating the current computing hardware sector), which are currently both covered under advanced materials.
2. Updating the scope of advanced materials, AI, communications, critical suppliers to government, data infrastructure, energy, suppliers to the emergency services, and synthetic biology sectors, to ensure those sectors keep pace with economic and technological developments.
3. Introducing water as a new area to be covered by mandatory notification, reflecting its position as critical national infrastructure at a time of increasing risk to the sector’s resilience.

The government considers that these changes do not amount to a major shift in policy and will have minimal overall impact on notification volumes. The published consultation document provides further detail on the changes to the sectors and invites stakeholders’ views on the proposed changes, as well as their experience of the NSIA regime more broadly, with a deadline of 14 October 2025.

The proposals to streamline and provide clarity on the 17 sensitive sectors and, in particular, to remove low risk transactions from the scope of the regime are welcome improvements. Although, the impact that these changes have in practice will remain to be seen.

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.