According to recent figures, the UK government had to intervene in eight attempted takeovers of British firms by Chinese buyers last year due to national security concerns. This number was higher than any other country, although UK and US deals were scrutinized.
Oliver Dowden, the UK Culture Secretary, stated that the government’s decisions were not biased toward any specific country but were driven by a clear-eyed approach to safeguarding national security. He emphasized that while he did not support a complete decoupling from China, protecting national security was paramount, just as it is for China.
The National Security and Investment Act 2021 grants the UK government the authority to block or impose remedies on investments deemed to pose a risk to national security. The Cabinet Office received 866 notifications of potential breaches in the last financial year, primarily in defense, energy, advanced materials, and communications sectors. Of these, 65 cases were called in for further assessment, with 42% involving acquirers associated with China, 32% with the UK, and 20% with the US.
While most deals were approved, the Cabinet Office issued “final orders” in 15 cases, which involved blocking, unwinding, or imposing conditions on the deals to protect national security. Among these final orders, eight were associated with Chinese acquirers, four with UK acquirers, and three with US acquirers.
When questioned about the disproportionate targeting of Chinese deals, Dowden explained that China is a major global investor, and the UK’s national security review has identified China as the largest state-based threat to economic security. Consequently, Chinese transactions are scrutinized, but the government’s assessment covers deals from various countries.
Chinese firms have faced increased scrutiny worldwide due to concerns about potential state exploitation for espionage purposes. Examples include the ban on Chinese telecoms giant Huawei from the UK’s 5G networks and the prohibition of Chinese social media app TikTok on UK government devices.
Dowden emphasized that the National Security and Investment Act aims to balance incentivizing foreign investment in the UK and protecting national security in an unpredictable global environment. The legislation provides confidence to foreign investors that their investments are safe while allowing the UK to mitigate risks associated with engagement with China. Dowden underscored the importance of de-risking such engagement rather than completely decoupling, as it aligns with the UK’s national interests regarding jobs and prosperity.