The government is to update the merger system to enable greater scrutiny of foreign investment with measures which it says are designed to better protect national security, and include substantially lowering the threshold for intervention
Currently the government can only intervene in mergers involving companies with a UK turnover of more than £70m or where the share of UK supply increases to 25% or over. The Department for Business, Energy and Industry Strategy (BEIS) is now consulting on plans to lower the threshold to businesses with a UK turnover of over £1m, and remove the requirement for a merger to increase a business’s share of supply of, or over, 25%.
BEIS is also consulting on longer-term proposals that will allow for better scrutiny of transactions that may raise national security concerns – this could include increasing risks of espionage, sabotage, or the ability to exert inappropriate leverage.
Potential changes in this area could include introducing a ‘call-in’ power modelled on that in the Enterprise Act 2002 to allow government to scrutinise a broader range of transactions for national security concerns within a voluntary notification regime; and/or introducing a mandatory notification regime for foreign investment in certain parts of the economy which are critical for national security, such as the civil nuclear or the defence sector. Mandatory notification could also be required for foreign investment in key new projects or specific businesses or assets.
The consultation will be split into two parts, with the section on amending the Enterprise Act through secondary legislation lasting four weeks. The proposals are to lower the turnover threshold from £70m to £1m and remove the current requirement for the merger to increase the share of supply to or over 25%.
These changes will apply to the dual use and military sector, that is –businesses who manufacture or design items that are subject to export controls; and companies that are involved in the design of computer chips and quantum technology.
The consultation on longer-term reforms including the expanded version of the ‘call in’ power and mandatory notification regime will last twelve weeks.
BEIS says a final package of reforms could include some or all of these options.
Report by Pat Sweet
