August 1, 2023

Key Points from the UK National Security and Investment Act 2021 Annual Report

Posted in Corporate

On 11 July 2023 the Cabinet Office published the UK Government’s first full Annual Report on the application of the NSIA for the period 1 April 2022 to 31 March 2023 (“Report”), having previously reported on the first three months following implementation of the NSIA in January 2022. The findings published in the Report give much greater detail of how the NSIA regime is being applied to M&A transactions and investments in the UK.


The National Security and Investments Act 2021 (“NSIA”) came into force on 4 January 2022 and greatly widened the powers of the UK Government to scrutinise and review a wide range of transactions, including mergers and acquisitions (“M&A”), investments and acquisitions involving certain assets in 17 key sectors of the economy that might give rise to national security concerns.

The NSIA requires the acquirer to notify the Cabinet Office of transactions in the key sectors of the economy, with the Secretary of State having the power to “call-in” the transaction for further review if it gives rise to national security concerns and potentially block the transaction if those concerns are sufficiently serious.  If the acquirer completes a transaction before it has been cleared, the transaction will be void and the acquirer and its directors could be subject to criminal prosecution.



  • A total of 866 notifications were made during the reporting period which is below the anticipated number of 1,000 to 1,830.
  • Of the 866 notifications, more than 77% were mandatory notifications, 21% were voluntary notifications (compared to just 11% in the last reporting period) and less than 2% were retrospective validation applications.
  • 766 notifications were reviewed by the Secretary of State during the reporting period.
  • 95% of notifications were accepted (642 mandatory notifications, 152 voluntary notifications & 12 retrospective validation applications) and just 5% of notifications were rejected (22 mandatory notifications, 19 voluntary notifications & 2 retrospective validation applications). The most common reason for rejection was that the wrong form had been used (e.g. mandatory notification form rather than voluntary).
  • The defence sector accounted for almost half of the mandatory notifications, followed by critical suppliers to the government and data infrastructure.
  • Voluntary notifications most commonly concerned the following sectors: advanced materials, defence and military & dual use.

Transactions “called-in”

Once the Secretary of State has accepted a notification, they have 30 working days to either “call-in” the acquisition for a more detailed assessment or clear it. An acquisition will be called-in if the Secretary of State suspects it may give rise to a risk to national security. The Secretary of State initially has 30 working days to assess the acquisitions, and may extend the initial period by another 45 working days.

  • A total of 65 call-in notices were issued (lower than the anticipated number of 70-95). Of those called-in, 57% were mandatory notifications, 26% were voluntary notifications, less than 2% were retrospective validation applications and 15% related to non-notified acquisitions.
  • Of the 766 notifications reviewed, 2% were issued a call-in notice and 92.8% were cleared.
  • Only 6% of mandatory notifications made were called-in compared to 12% of voluntary notifications.
  • Notifications called-in mainly concerned military & dual use, defence and advanced materials.
  • Most notifications called-in involved investment originating from China, the UK or the USA.
  • All notifications were called-in within the 30-working day statutory time limit.

Final orders

The Secretary of State will assess called-in notifications and if, on the balance of probabilities, they consider that a risk to national security has arisen or would arise as a result of the acquisition the Secretary of State may make a final order. A final order could impose remedies that mitigate risks to national security arising from the acquisition, for example, blocking an acquisition or ordering an acquisition be unwound.

  • Of notifications called-in, 15 (or 20.8%) were issued with final orders.
  • 5 acquisitions were blocked or subject to an order to unwind.
  • The final orders most commonly concerned military & dual use and communications.
  • The origin of investment for final orders mainly involved China followed by the UK, then the USA.
  • 1 final order has been varied, and 1 final order has been revoked (meaning the total number of final orders still in effect at the end of the reporting period was 14).


The Report includes detailed statistics and has included additional information not statutorily required (such as the origin of investment) in an apparent attempt to increase transparency as to the functioning and application of the NSIA regime. In terms of the origin of investment, 42% of the call-in notices were for acquisitions involving acquirers associated with China, 32% with acquirers associated with the UK, and 20% with the USA.

It is noticeable that 47% of the mandatory notifications received related to the defence sector. Other sectors such as critical suppliers to the government and data infrastructure were ranked in the top 3 sectors for mandatory notifications received, but noticeably these sectors each accounted for less than 10% of notifications called-in. Instead, the areas of the economy with the highest number of call-in notices were military & dual use, defence, and advanced materials.

Although the Secretary of State may, with the consent of HM Treasury, give financial assistance to an entity in consequence of making a final order, no such financial assistance was given during the reporting period. The Secretary of State did not issue any penalties during the reporting period for non-compliance with the NSIA regime, nor were any criminal prosecutions concluded.

Encouragingly, the Investment Security Unit (the body within the Cabinet Office that carries out the reviews) are processing applications within the statutory timescales so initial concerns that the NSIA process might cause greater delays to transactions does not seem to have materialised.

As the NSIA regime is still relatively new, it is likely that businesses and other stakeholders will gain more clarity over time as more applications are made and annual reports published. While the NSIA regime is still criticised for being too opaque, it is hoped that the findings of the Report will give businesses and stakeholders some comfort and understanding as to how the regime has been operating in its first full year.

Contact us now:

If you are considering any form of M&A transaction, investment or other transaction we can advise whether the NSIA will apply to your transaction so you do not expose yourself to potential criminal liability. If it does apply, the earlier that you can make a notification, the less likely your transaction will suffer delays as a result of any NSIA notification that needs to be made.

Contact our Corporate team

View more articles in this area:

View more articles related to Corporate