What has been the impact of the UK’s foreign investment regime?

Almost five months have passed since the UK’s National Security and Investment Act 2021 (NSIA) took effect, introducing a hybrid screening regime consisting of a mandatory regime for 17 of the most sensitive sectors of the economy (including in the tech sector specifically: AI, cryptographic authentication, computing hardware and quantum technologies, advanced robotics, communications, data infrastructure, and advanced materials which serve as input to the tech sector) and a voluntary regime for all other sectors. The Act radically overhauled the UK’s approach to foreign investment screening, with the tech sector squarely in focus, accounting for over a third of the 17 sensitive sectors.

The UK Government’s intention was to establish an efficient and proportionate screening regime to allow fast clearances of most non-problematic deals and thereby minimise the burden of the NSIA for business. In our ForeignInvestmentLinks blog post, “Five months with the NSIA – what have we learnt?”, we consider how effective the NSIA is at reaching these goals, how investors have reacted to the new regime, and where we understand the Investment Security Unit will helpfully clarify going forward in a series of market guidance notes. In short, the system has been working efficiently, and within the timelines promised, for non-problematic cases, and investors seem to be taking the NSIA in their stride. The broad scope of the NSIA has, however, lead to many precautionary notifications.

The post also considers what to expect from the most recent call-ins, including the crucial test-case of China-backed Nexperia’s acquisition of a stake in Newport Wafer Fab (NWF), the UK’s largest silicon wafer manufacturer. The NWF case is expected to be a “critical test case” of the UK Government’s appetite to exercise its new powers and will be watched closely for an indication of the types of remedies which could be expected, the length of the review process, and the issues the UK Government is likely to focus on.