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While the new UK Government has been very vocal about the perceived role of regulation in stifling economic growth – and the CMA has become a particular lightning rod for criticism - there has been relatively little focus to date on the National Security and Investment Act (NSIA).
Our earlier blog posts discussed the Conservative Government’s call for evidence launched at the end of 2023 (and our responses to it) and the Government’s response in April 2024. However, there had been scant indication of the approach that the Labour Government would take until last week.
This has all changed with the UK Government’s modern industrial strategy policy paper. Amidst a record-low number of new FDI projects in the UK in the financial year ending this March, the industrial strategy policy paper sets out the Government’s ambition to create a “predictable, proportionate, and transparent investment screening framework”.
The key steps in this direction are:
While growth may be the overriding objective for the current Government, it is equally keen to burnish its credentials as a responsible national security screening authority against a backdrop of heightened geopolitical tensions. This may lead to tinkering round the edges, rather than major surgery to significantly reduce Government powers of intervention.
The geopolitical realities were underscored by the National Security Strategy, also published last week, which notes significant challenges “in an era of radical uncertainty” and sets out an ambitious and expansive strategic framework that ties directly into mandatory NSIA sectors. Its core themes include the pivotal role of science and technology, particularly in quantum computing, engineering biology and AI, as pillars of international competition. There is a clear focus on energy security and strengthening UK sovereignty, with commitments to rebuild the “core defence industrial base” (backed by significant MoD investment) and maintain “independent nuclear deterrent”.
Similarly, the Foreign Secretary’s statement to the House of Commons last week on the Government’s approach to China following the cross-Whitehall audit notes “a full spectrum of threats” from China and draws a direct link to the forthcoming consultation on NSIA sector definitions. However, the statement simultaneously underlines the aim of delivering “secure growth” from the UK-China relationship.
It is also notable that the policy paper does not mention cooperation with international partners (notably the Five Eyes partners) in relation to investment screening. This is noteworthy given the US-UK commitment in their recent trade deal pact to “cooperate on the effective use of investment security measures, export controls, and ICT vendor security.”
While the policy paper sets out a fresh ambition to refine the NSIA regime, promising sharper definitions, more guidance, new exemptions and greater transparency, it does not signal a radical overhaul. The much-anticipated consultation is, for now, without a firm timetable.
A major recast of the regime’s scope and focus seems unlikely. Instead, meaningful but incremental changes appear a more probable outcome: clearer guidance, updated sector definitions, possible new sectors added and targeted exemptions for lower-risk transactions or acquirers.
The core challenge for policymakers remains unchanged. They must find a workable balance between attracting investment, safeguarding national interests and maintaining close alignment with key international partners. This balancing act will ultimately define the scope and the limits of what comes next – stay tuned.
1 July 2025
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