UK national (in)security? More NSIA notifications, increased ministerial focus on growth and inward investment, and a consultation on what is in scope

However, given the uncertainty the NSIA has brought to areas of corporate activity in the UK, and against a feverish backdrop of needing to boost investment and the economy, the Government also announced an intention to exempt certain types of activity – including some internal reorganisations and appointment of liquidators/receivers – from a mandatory filing obligation, and promised to publish further guidance on the regime. No concrete details have yet been provided, but are expected soon.

While the notion of national security remains undefined in the UK, the Prime Minister has stated that “economic security is national security” and it is through this lens that investors and businesses must now also consider the UK’s regime.

This article distils the key points from this flurry of activity.

Looking forward…

In April 2024, following a Call for Evidence, the previous Government concluded the regime was “working well” but identified a number of concrete steps it was planning to take by the summer of 2024.

The intervening general election, and subsequent change of administration, delayed many of these proposals. However, the Government has now announced that it will be:

• Exempting certain types of transactions from the need to submit a mandatory notification – this includes ‘certain’ (albeit to date unspecified) internal reorganisations as well as the appointment of liquidators, special administrators and official receivers. This will require secondary legislation but no further details have been published.
• Developing additional guidance around aspects of the regime, although no further details on what this will cover have been provided.
• Launching a consultation on the scope of the current 17 mandatory sectors.

The consultation, which closes on 14 October 2025, seeks views on a range of topics, including:

• Introducing new standalone sectors to include Critical Minerals and Semiconductors, as well as introducing Water as a new area where mandatory filings will be required. Overall this will increase the number of mandatory sectors from 17 to 19 and will bring more transactions into scope of a mandatory filing requirement.
• Amending and refining the scope of various sectors and seeking to clarify or move some existing definitions to other sectors. This will include narrowing the scope of some sectors – including AI, to remove ‘off the shelf’ applications or those which are available to consumers, and Communications. However, some sectors are being broadened, including Data Infrastructure (to include third-party operated data centres) and Critical Suppliers to Government – while a narrower list of Government departments are in scope, there is a proposed broadening of the types of services (including accounting, HR, certain IT and facilities management type services now being in scope).

… and reflecting on the past year – six key takeaways from the Annual Report

The Cabinet Office also published the NSIA’s fourth Annual Report (“Annual Report”), which provides statistical information on how the regime has functioned in practice during its third full year in operation from 1 April 2024 to 31 March 2025 (the “reporting period”). Please find our earlier update on the Government’s third Annual Report here.

Some of the key details from the Annual Report are set out at the end of this update. However, six notable points from the Annual Report are as follows:

1. Notifications break the 1,000 barrier: the 1,143 notifications made are an increase of 26% from the previous year.
2. ‘Economic security is national security’: after defence / military and dual-use, the next two most common sectors where call in notices were issued were advanced materials and energy, therefore increasingly highlighting a focus on economic security.
3. China still a focus but maybe less so: investment from China accounted for the second highest number of final orders (7) but also the second highest for clearances following a call-in. Interestingly, of the notifications made by investors from China, well over half were made on a voluntary basis, perhaps highlighting a perceived risk of proceeding with investments without the Government’s blessing. See our detailed article on Chinese investment here.
4. 30 working days means 30 working days (or maybe 29): the time taken to clear a notification once accepted remains consistent at nearly the entire statutory duration with a median of 29 working days to assess a filing. The time taken to accept a filing as complete, which is not mandated in legislation, is around a week.
5. 60 offences identified and counting: the number of offences for failing to make a mandatory filing was identified to be 60. This is similar to the number of retrospective validation applications made (55) so it is unclear if these are being identified by the Government’s own market scanning activities or parties self-reporting. However, this is clearly on the Government’s radar.
6. Final orders dramatically increase: in the previous year there were only five final orders issued but in this reporting period there were 17.

What’s next and how we can help

The consultation on the mandatory sectors runs until the 14 October and the Government is inviting views from all interested parties. There are also upcoming proposals of secondary legislation and further guidance on the regime. If you are interested in putting forward views, or would like assistance in making a submission, please let us know.

Hogan Lovells practises law at the intersection between business and Government and is particularly well placed to help – having a deep understanding of the regulatory landscape, the detail of the NSIA regime, and the global foreign investment review environment. We also have extensive experience of working inside Government, and advising corporations on the machinery of Government and its policy priorities. Let us help you navigate the regime and, if necessary, engage with Government and relevant stakeholders.

Annual Report numbers in detail

The statistics provided in the Annual Report include the number and type of notifications made, the key sectors engaged by the regime and details on the origin of investment.

More notifications made

• In total, 1,143 notifications were made to the ISU during the reporting period. This is an increase of 237 notifications compared to the previous reporting period, which saw a total of 906 notifications made to the ISU.
• The vast majority of notifications reviewed (~95%) were cleared without being subjected to more detailed scrutiny.
• 954 were made on a mandatory basis (an increase of nearly 27%) and 134 were voluntary notifications. There were an additional 55 retrospective validation applications. These are transactions that completed without having obtained the necessary approval.
• Across all of the notifications submitted, the most common sector cited remains Defence (56% of notifications being associated with this area of the economy). The second most prominent sector was Critical Suppliers to Government, relating to 21% of notifications. These are the same most prominent areas of the economy as they were in the previous reporting period.
• The notification trends regarding the "origin of investment" metric reflect the patterns recorded in the previous reporting period. The UK (65%) and the US (29%) were the "origin of investment" in the vast majority of accepted notifications.
• Similar to the increase in notifications received, there was an increase in rejected notifications. The Government rejected 37 notifications in the reporting period, compared to 24 from the previous reporting period. The total of accepted notifications is also higher compared to the previous reporting period (1,110 to 876).

More transactions and investments subject to in-depth scrutiny

• The total number of call-ins increased from 41 to 56 this reporting period. These consist of 49 call-ins following a reviewed notification and 7 concerning non-notified acquisitions.
• A similar number of call-in notices are being issued relating to mandatory notifications (28) and those following a voluntary notification (20). One related to a retrospective notification and the 7 above-mentioned non-notified acquisitions.
• However, similar to last year a much greater proportion of total voluntary notifications are called in (16% of all voluntary notifications reviewed).
• While in the previous reporting period the second most cited sector did not account for many call-in notices (10%), in this reporting period we saw Critical Suppliers to Government as the 6th most cited sector (21%). However, Defence (36%) and Military and Dual-Use (29%) continue to dominate the cited sectors in call-in notices.
• While the UK, US, and Chinese investment dominating call-in notices, there is a notable swap between the UK and China. In this reporting period, UK investment accounted for 48% of call-in notices, whereas Chinese investment accounted for 32%. This stands in direct contrast to the previous reporting period, in which Chinese investment dominated by 41% and UK investment followed with 39%.
• 5 notifications were withdrawn after having been called in. This is half of the previous 10 withdrawn notifications. It is difficult to know whether this decrease is significant and represents investors becoming more aware of how the regime operates or are being put off making investments if they perceive a potential risk of detailed scrutiny.

Interventions made to address national security concerns

• During the reporting period, 17 final orders were imposed (a significant increase from the 5 imposed in the prior reporting year). All but one transaction was conditionally approved; one acquisition had to be unwound.
• The Secretary of State is required to keep final orders under review and consider requests to vary or revoke them where there has been a material change in circumstances. During the reporting period, 3 final orders were varied and 3 revoked.
• Of the 17 final orders imposed:
  • 11 were linked to the UK, 7 to China and 3 to the US. This stands in contrast to the previous reporting period, in which no transaction linked to China received a final order and the UK and US each received 2.
  • The most prevalent sectors were Defence (9), followed by Military and Dual-Use (6) and Energy (5). While in the previous reporting period, Defence (4) accounted for the most final orders too, and was additionally closely followed by Military and Dual-Use (2), Energy did not feature at all.
  • One point to note is that the Energy sector has a disproportionate rate of final orders compared to the number of notifications made citing this as a relevant area. Energy features in 5 final orders, however, only accounted for approximately 9% of accepted notifications.
• Similar to the previous reporting period, the Government took an average of 29 (median) working days to decide to call in an acquisition once accepted. The Government took an average of 70 (median) and 69 (mean) working days from calling in an acquisition to issuing a final order. The latter is a sharp increase from the previous reporting period, in which it took an average of 34 (median) and 51 (mean) working days. The Government, however, notes in its Annual Report that "no conclusions should be drawn regarding trends in the time taken" due to the smaller number of final orders issued in the previous reporting period.
• Compared to the previous reporting period, we see an uptick in the use of additional periods and a decrease in voluntary periods. The additional period has been used 21 times (from 12) and the voluntary period only twice (from 4).
• With regard to enforcement and compliance, no penalties under the NSIA were issued and no criminal prosecutions were concluded during the reporting period. The Government identified 60 offences of completing a notifiable acquisition without approval.

Authored by Robert Gardener, Christopher Hutton, Christopher Peacock, and Denise Hotham-Kellner.