Defense companies such as Rolls-Royce could be shielded from hostile takeovers.
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The U.K. government is seeking new powers to “investigate and intervene in potentially hostile foreign direct investment” and block takeovers it would deem contrary to the country’s national interests, according to a new national security and investment bill published on Wednesday.
- Under the bill, investors will have to notify the government about transactions “in designated sensitive sectors, such as (the) defense, energy and transport sectors.”
- That would allow the government to “investigate and take action to address any national security risks” as well as screen and “interrogate the acquisition of sensitive assets and intellectual property, as well as the acquisition of companies.”
- “Hostile actors should be in no doubt — there is no back door into the U.K.,” said business secretary Alok Sharma.
- The U.K. government’s release says that “the vast majority of transactions will require no intervention and will be able to proceed quickly and with certainty,” and Sharma insisted that the country “remains one of the most attractive investment destinations in the world” and wants to “keep it that way.”
- Sanctions for noncompliance with the new regime would include fines of up to 5% of annual company revenue or imprisonment of up to five years for guilty executives.
- The government has identified 17 sectors where notification will be mandatory, notably defense, communication, and sensitive industries such as nuclear, artificial intelligence, data infrastructure, or quantum technologies.
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The outlook: The bill doesn’t go much beyond what others, like other European countries or even the U.S., have in their legal arsenal to counter unwanted investments. After prompting from French President Emmanuel Macron and German Chancellor Angela Merkel, the European Union itself is currently looking for ways to strengthen its defenses against takeovers raising geopolitical problems, such as those initiated by Chinese state-linked companies.
But the bill also illustrates how far the current Conservative Party government has strayed from Thatcherism, the ideology that inspired more than 40 years of economic policy, based on a strict laissez-faire (meaning, minimum government interference) approach to business matters. And it comes just as London is fighting the EU to be able to provide state aid to the country’s private sector once it leaves the single market at the end of the year.
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