The UK government has announced plans to simplify investment security regulations under the National Security and Investment (NSI) Act 2021, aiming to reduce unnecessary red tape for

businesses as part of its broader Plan for Change.

Key reforms:

- Less Bureaucracy for Internal Changes: Businesses will no longer need to notify the government for certain internal reorganisations or the appointment of liquidators, special administrators, and official receivers. These transactions have historically shown low national security risk and are rarely investigated.

- Focus on Higher-Risk Deals: The updated rules will allow the Investment Security Unit (ISU) to concentrate on transactions that pose greater threats to national security.

Pat McFadden, Chancellor of the Duchy of Lancaster, stated:

“The government has been clear about our ambition to cut red tape for businesses, while taking firm action to protect national security as we deliver the Plan for Change. 

Data shows our investment security powers are working well, but there’s more we can do to ensure our tool kit keeps pace with the modern economy. We’re taking action to hone the type of transactions facing the greatest scrutiny, as well as consulting on updates to the sectors of the economy specified in the legislation. Businesses are at the heart of these plans and I look forward to engaging widely in the weeks ahead”.

Public consultation: sector updates under review

A public consultation is launching on 22 July (running until 14 October) to reassess the 17 sensitive sectors currently requiring mandatory notification for acquisitions. These sectors haven’t been revised since 2021.

Proposed updates include:

- Creating new standalone sectors for Semiconductors and Critical Minerals, which are currently grouped under "Advanced Materials"

- Moving Computing Hardware under the new Semiconductors category

- Considering Water as a new sector due to increasing threats to infrastructure resilience

2024–2025 NSI annual report highlights:

- 1,143 notifications were received, up from 906 the previous year

- Only 4.5% of these were called in for deeper review

17 final orders were issued:

- 16 approved with conditions

- 1 required a divestment

- Most activity related to the Defence, Critical Government Suppliers, and Military & Dual Use sectors

- The majority of notified acquirers were based in the UK, followed by the US and China

These reforms reflect the government’s intention to modernise its investment screening while maintaining strong national security protections. Businesses are encouraged to take part in the consultation to help shape the future of the UK’s economic security framework. Photo by Phil Whitehouse, Wikimedia commons.