NS&I Act, 5 months in…

It has now been 5 months since the National Security and Investment Act entered into force


On 16 June, Business Secretary Kwasi Kwarteng published a report reflecting on the progress of the Act (covering January to March 2022). As we mentioned in a previous article, this expansive new regime requires notifications to be made to the government where transactions fall into 1 of 17 “sensitive areas” and gives the government an extensive power to call in for review any transactions which fit the criteria and may cause national security concern.

Based on the figures in the report, it does seem true that the new regime provides businesses a speedy outcome, with the average time to inform parties that a notification has been accepted being 3 working days and the large majority of deals being cleared within 24 working days (exceeding the initial promise of a 30 working day deadline). The report also references a case that was decided within 11 days of the notification being accepted. The government however notes that volumes may change and at this stage, it is not possible to be complacent.

Whilst the new system may be quick, it is not proving so simple to navigate in many instances. The government has already published multiple guidance documents but it would certainly be useful to see further practical examples of transactions falling in certain sensitive sector definitions or any carve-outs that may apply. In instances where the government has been forthcoming in providing further guidance on specific transactions, these types of Q&A responses could be published more widely. It would also seem that, aside from the government statement on the use of the call-in power, businesses would welcome a more detailed breakdown of what the government considers would pose a risk to national security.

As was expected, the main sectors which have caused concern for the government and the types of transactions being reviewed further concern artificial intelligence, advanced materials and satellite and space technologies. It is interesting to note that synthetic biology hasn’t been mentioned as a key sector of interest with regard to the transactions that have been reviewed.

The report contains a number of statistics on the notifications received so far which provide a useful overview:

  • the government has received 222 deal notifications in the 3-month period, around 7% of which were called in for further review (this puts the government on track to receive less than the estimate of 1,000 and 1,830 notifications per year, but could be due to a Covid-related M&A decline towards the end of 2021);
  • there were 196 mandatory notifications, 25 voluntary notifications and 1 retrospective validation (several mandatory notifications were rejected because they should have been voluntary, and in some cases, the government pragmatically accepted a single notification to cover multiple qualifying acquisitions e.g. for internal group reorganisations);
  • of the voluntary notifications received, the 5 most common sectors concerned were professional, scientific and technical activities, data infrastructure, other service activities, energy and computing hardware (see our previous article on The NS&I Act and the ‘Computing Hardware’ sector).

This report complies with the government’s statutory requirement to publish an annual progress update (further reports will cover years from 1 April to 31 March) and will certainly provide a useful insight into the figures around notifications being made and the types of transactions causing concern.