In brief
On 22 July 2025, the UK Cabinet Office made three major announcements relating to the National Security and Investment Act (“NSI Act“), which embodies the UK’s foreign direct investment (“FDI“) screening process.
Firstly, the UK Government confirmed its intention to create exemptions to the NSI Act regime for certain types of internal reorganisations. Secondly, it launched a planned consultation on a raft of proposed changes to the notifiable sectors, including the introduction of three new standalone mandatory notification sectors. Finally, the Government also published its latest annual report on the operation of the regime. These announcements signal some of the most significant actual and contemplated changes to the regime since the NSI Act – the UK’s first, standalone foreign investment screening regime – came into force more than three years ago. Together with the recently published Industrial Strategy and National Security Strategy papers, the proposals mark an important step by the current Labour Government towards creating a more reliable and up-to-date FDI screening regime in the UK, in line with their main objective of achieving economic growth.
Five key takeaways on the NSI Act updates
- The UK Government will soon introduce exemptions to the UK’s FDI screening regime, notably in respect of certain internal reorganisations. Further details of these exemptions have not yet been published but will be introduced shortly.
- The Government has proposed numerous changes to the mandatory notification sectors, including three new standalone sectors: Critical Minerals, Semiconductors and Water. The Government has opened a consultation to hear views on these proposed changes which will run for 12 weeks until 14 October 2025.
- The number of notifications submitted and the transactions reviewed under the NSI Act increased significantly compared to the previous year (approx. 1,150, up from approx. 900), although the proportion of notifications called-in for an in-depth (i.e., second phase) review remained broadly the same.
- The number of deals that were subject to a final order (i.e., either cleared with conditions or outright prohibited) was 17 (significantly up from five in the previous year)with one of these being subject to a divestment order and five withdrawn by the parties before a decision was issued.
- Deals involving investors from China continue to be heavily scrutinised but deals with acquirers associated with the USA, Australia, India, Singapore, Taiwan, the UAE and various European countries also subject to final orders. The most scrutinised areas of the economy (by target activity) continue to be the defence and military and dual-use sectors.
For further details on these significant NSI Act updates, and how it may affect your business, please read our full client alert here.
