Key Takeaways
- Building on business feedback, the UK Government has announced plans to update the National Security and Investment (“NSI”) Act 2021 to reduce regulatory burdens on companies and focus scrutiny on higher-risk transactions.
- Key proposals include mandatory NSI approval no longer being required for purely intra-group reorganisations or the appointment of liquidators, special administrators or official receivers, both significant burdens on sponsors and distressed investors doing business in the UK today.
- Semiconductors and Critical Minerals would also be introduced as new mandatory notification sectors (previously both partially covered by the Advanced Materials sector), while Computing Hardware would be incorporated into the new Semiconductors sector. The UK Government is also considering whether transactions within the Water sector should fall within scope of mandatory notification under the UK NSI Act.
- Some of the reforms aim to reduce red tape and focus UK Government resources on the c. 4.5% of deals that currently warrant a call-in, but careful consideration should be given to any expansion of the sectors covered by the mandatory notification regime. The consultation will close on 14 October 2025, and legislative change will then be required before any changes take effect.
The UK Government has announced the first significant proposed changes to the UK NSI Act since its inception. Published on 22 July 2025 as part of the wider “Plan for Change”, the package combines immediate reforms with a public consultation designed to recalibrate the scope of mandatory filings.
Most immediately relevant for deal-makers is the proposed exemption for two categories of transactions that, according to the Investment Security Unit’s own data, rarely raise substantive security concerns:
- Internal reorganisations that do not alter ultimate control, which today account for a significant volume of filings for sponsors during the investment lifecycle since its inception; and
- The appointment of insolvency practitioners (i.e., liquidators, special administrators and official receivers).
Once implemented, these exemptions should eliminate a material volume of low-risk filings, reducing the filing burden on companies and freeing up the UK Investment Security Unit to concentrate on transactions with a genuine national-security nexus.
However, the UK Government also intends to expand the list of sensitive sectors that trigger a mandatory notification obligation under the NSI Act. The proposal is to introduce new Semiconductors and Critical Minerals mandatory notification sectors (previously both partially covered under the Advanced Materials sector). Computing Hardware, currently its own sector, will be moved under Semiconductors. The consultation also canvasses views on bringing aspects of the Water sector into the mandatory notification regime, citing growing resilience concerns faced by the sector.
The annual NSI report, released alongside the announcement, reinforces the rationale for reform: despite a record 1,143 notifications last year, only 4.5 percent were called in, and just one transaction was ultimately blocked. Consistent with prior years, the largest proportion of notifications involved acquirers associated with the UK, followed by the US, and target companies active in the Defence, Critical Suppliers to the UK Government and Military & Dual Use areas of the economy. In addition, of the 17 final orders issued, the majority involved acquirers associated with the UK, followed by China and the USA.
While the headline direction of travel is distinctly pro-growth and in line with changes recently made by the Competition and Markets Authority for the UK’s merger control regime, the creation of new standalone sectors signals that the UK Government’s appetite for intervention in strategically vital areas remains undiminished – and companies doing deals within scope of newly created mandatory sectors will face greater (rather than fewer) regulatory hurdles.
Stakeholders have until 14 October 2025 to respond to the consultation, following which legislative change will need to be required before the changes take effect.
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