24 May 2021

UK government review powers over FDI (March 2021 update focussing on mandatory sectors)

The UK economy remains open for business and overseas investment although since November 2020 there are new controls on FDI will need to be navigated as updated in March 2021 as below.

By way of reminder, please see our original overview of the National Security and Investment Bill 2020 here which sets out the new requirements, minimum thresholds, mandatory notification sectors (17 in total) and other factors to be considered.

Although the new Bill is not yet passed into law by Parliament it is currently in effect as the Government seeks to prevent parties circumventing the legislation by completing deals before the Bill is finally approved. Therefore, it applies as is currently drafted, subject to a consultation that completed in January 2021, the results of which were published in March 2021.

The remaining text of the Bill (substantially in its current form) will be further debated in Parliament before final approval, now expected to be after the UK summer.

March 2021 update following the consultation on the Bill

Following conclusion of the consultation on the draft Bill, the 17 mandatory sectors remain in place although certain definitions are amended to provide more clarity in key areas, particularly as follows.

  • Advanced materials – the revised definition identifies the same core categories (advanced composites, metals and alloys, engineering and technical polymers and ceramics, technical textiles, metamaterials, semiconductors, photonics and optoelectronics, graphene and related materials, nanotechnology and critical materials) but each sub-category list has been extended and has wider application. Careful consideration of the definitions if transacting in this sector is required.

  • Advanced robotics – now focusses on autonomous and semi-autonomous machines although excludes toys and some consumer products.

  • AI – narrower definition to focus on three higher risk areas where AI technology is used, namely: (a) the identification of objects, people and events; (b) advanced robotics; and (c) cyber security (although Government call in powers remain for anything else). Licenced products will not be caught as many businesses now use these.

  • Civil nuclear – some clarifications and excludes holders of non-nuclear radioactive material.

  • Communications – now applies only to entities who are involved in the provision of communications networks, services and associated facilities wholly or mainly to members of the public. Further amendments are being considered.

  • Computing Hardware – continue to apply to consumer products although there have been some clarifications for defined terms such as computer processing units.

  • Critical Suppliers to Government – now focusing on contracts with government entities (not those that the Government may own) for the protection of classified materials, estates and people who work with such materials that could raise a national security risk.

  • Critical Suppliers to emergency services – some refinement to definitions although text substantially retained – specific items and categories of goods added.

  • Cryptographic authentication – removal of products ordinarily sold to consumers as only intends to capture entities that research, develop or produce products whose primary function is authentication to be used in systems critical for national security.

  • Data infrastructure - now removes entities that merely own the site or building that houses data infrastructure, rather than the infrastructure itself.

  • Defence – this is one of the more problematic sectors as many businesses provide goods and services to the military and continue to be deemed to potentially be of national security concern – no clear definition of national security added in this context so continues to have wide scope.

  • Energy – removal of retail electricity suppliers but continues to apply to those that own the infrastructure/generation assets. For petroleum infrastructure and pipelines, only those that have throughput of 50,000 tonnes in the first year will be caught. Definitions are being further scrutinised to focus on key parts of overseeing or operating any part of the UK electricity and gas markets.

  • Military and Dual Use Technology - definition has been amended such that it now covers “researching, developing or producing restricted goods or restricted technologies”.

  • Quantum technology - revised definition focuses on capturing entities that develop or produce quantum technology products – excludes pure research and entities that merely use quantum technology to supply services.

  • Space and satellite technology - narrowed to remove the provision of telecommunications and internet services via satellite and more of a focus on national security concerns.

  • Synthetic biology – rather than the broader “Engineering biology” sector this is narrowed to focus on synthetic biology. Gene editing, gene therapy and DNA manipulation are now included, but there are also now a number of activities that are expressly excluded for non-critical activities, including bioremediation, clinical diagnostics, food production (e.g. lab-grown protein) and therapeutic gene therapy.

  • Transport – this has always been limited to ports, harbours and airports so will not apply to the rail sector or public services like buses or trams. The definition is tightened to refer to entities who own or operate ports and harbours (or related infrastructure) that handled 1 million tonnes or more of cargo in the year preceding the transaction.  For airports, only entities who have “overall responsibility for [airport] management” or are otherwise involved in traffic control operations are within the scope (excludes other services such as catering).


Transactions outside of the mandatory sectors remain “safe” from scrutiny whilst minority investments below 25% should also be excluded from the legislation (unless there is material influence or control for minority investors).

The changes to the Bill following the consultation have clarified some of the sectors although we continue expect a significant number of mandatory notifications to be made to Government for approval and hence resultant impact on timing for transactions in these sectors.

The Government is recommending early consultation with BEIS, particularly in case of any uncertainty. Email and telephone consultations are possible and we would be pleased to advise further or assist in any processes.

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