Under the National Security and Investment Bill, which is being introduced in Parliament today, the rules on foreign takeovers are being tightened up  to ensure the government can scrutinise, impose conditions on or, as a last resort, block a deal in any sector where there is an unacceptable risk to national security.

Barring narrow exceptions, the government’s current powers under the Enterprise Act 2002 are limited to mergers involving target enterprises with a turnover of £70m or a combined share of supply of 25% or more. There have been 12 public interest interventions on national security grounds since 2002.

Under the bill, investors and businesses will be mandated to notify a dedicated government unit through a single digital portal about certain types of transactions in 17 designated sensitive sectors.

These include defence, energy, communications, data infrastructure, artificial intelligence and transport.

Unlike the existing legislation, the National Security and Investment Bill does not include minimum turnover and share of supply thresholds.

The new regime will apply to investors from any country, and also gives the government wider screening powers regarding the acquisition of sensitive assets and intellectual property, as well as the acquisition of companies.

The Department for Business, Energy and Industrial Strategy (BEIS) said the legislation will be ‘targeted and proportionate’, and that most transactions will be cleared without any intervention.

Examples of possible conditions that could be put on deals posing a risk to national security include altering the amount of shares an investor is allowed to acquire, restricting access to commercial information, or controlling access to certain operational sites or works.

There will be sanctions for non-compliance with the regime, which include fines of up to 5% of worldwide turnover or £10m – whichever is the greater – and imprisonment of up to five years.

Transactions covered by mandatory notification which take place without clearance will be legally void.

BEIS said investments will be screened much more quickly than the current regime, assessing transactions within 30 working days, with timelines set out in law rather than by the government on a case-by-case basis as is currently the case.

The government will not revisit a transaction once cleared unless inaccurate information was provided.

BEIS said it is taking a five-year retrospective power to call in transactions in the wider economy which were not notified but may raise national security concerns, similar to the powers available under the French, German and Italian takeover regimes.

However, these powers will not apply to transactions which took place prior to the bill’s introduction to Parliament, so businesses and investors have certainty about historical deals.

Business secretary Alok Sharma said: ‘The UK remains one of the most attractive investment destinations in the world and we want to keep it that way.

‘But hostile actors should be in no doubt – there is no back door into the UK.

‘This Bill will mean that we can continue to welcome job-creating investment to our shores, while shutting out those who could threaten the safety of the British people.’

A new Investment Security Unit will sit within BEIS and provide a single point of contact for businesses wishing to understand the bill and notify the government about transactions.

The unit will also coordinate cross-government activity to identify, assess and respond to national security risks arising through market activity, providing certainty for businesses that they will not be targeted and exploited by hostile actors.

The UK is not alone in making such changes to its regime. Earlier this year the US introduced mandatory notification requirements for transactions concerning specified types of businesses as part of a broader programme for reform, while the Australian government introduced legislation requiring foreign investors to seek approval to acquire a direct interest in sensitive national security businesses.