The government has published its second annual report (the “2023 Report”) into the operation of the National Security and Investment Act 2021 (the “NSIA”).

For an overview of the NSIA regime, see our article here.

The 2023 Report is the first full 12-month period analysis of the functioning of the NSIA regime. Last year’s report (published June 2022) (the “2022 Report”) collated data from the first three months of the regime.

The 2023 Report reveals some interesting trends from the regime’s first full year of operation, which we consider in detail below.

The 2023 Report – findings


The 2023 Report states that 866 notifications under the regime were made in the 12-month reporting period. This figure falls short of the estimated 1,000 – 1,830 notifications to be received each year but is broadly in line with the number of notifications reported in the 2022 Report (222 notifications which, when extrapolated to cover the full year, brings the number of notifications expected to be received to 888).

When the Secretary of State receives a notification of an acquisition, they must “accept” or “reject” that notification. If a notification is rejected, the parties may resubmit the notification to address the feedback received by the Secretary of State, following which the notification may subsequently be accepted. Once a notification has been accepted, the initial 30 working day assessment period (see below) will commence. There were:

  • 671 mandatory notifications (77.77%). Of those evaluated, 642 were accepted (96.69%) and 22 were rejected (3.31%). 7 notifications were still being evaluated as at 31 March 2023.
  • 180 voluntary notifications (20.79%). Of those evaluated, 152 were accepted (88.89%) and 19 were rejected (11.11%). 9 notifications were still being evaluated as at 31 March 2023.
  • 15 retrospective validation applications (1.73%) (for a notifiable (i.e. mandatory) acquisition that had completed without approval and would otherwise be legally void). Of those evaluated, 12 were accepted (85.71%) and 2 were rejected (14.29%). One retrospective validation application was still being evaluated as at 31 March 2023.

These figures demonstrate a slight increase in the number of voluntary notifications being rejected but otherwise the percentage of applications accepted and rejected are broadly similar to those covered by the 2022 Report.

The reasons for rejection are mostly procedural (for example a voluntary notification should have been filed as a mandatory notification or structure charts did not include the required information) so it is important to seek professional advice prior to submitting an application in order to avoid unnecessary delays to the acquisition.

It took an average of 4 working days for the government to accept each notification but an average of 7-10 working days to reject a notification.

Areas of the economy

Mandatory notifications have been received for acquisitions taking place in each of the 17 sensitive areas of the economy. Most of the mandatory notifications related to five key sectors:

  1. Defence (twice the proportion of notifications compared to the next largest area of the economy)
  2. Critical Suppliers to Government
  3. Data Infrastructure
  4. Military and Dual Use
  5. Artificial Intelligence

Given that transactions involving all “suppliers” to the Ministry of Defence are automatically covered by the NSIA regime, perhaps it is unsurprising that 47% of mandatory notifications were related to Defence.

The list of sectors of the UK economy that are covered by the voluntary notification regime is wider than the 17 sensitive sectors that are covered by the mandatory regime. Most of the voluntary notifications were also made in respect of the five key sectors noted above (albeit where the transaction does not meet the specific criteria for a mandatory notification) but interestingly there were several notifications in respect of other sectors, such as Real Estate Activities and Academic / Higher Education Research and Development. This highlights the broad application of the NSIA regime across multiple sectors.

Call-in notices

Once a notification has been accepted, the Secretary of State has 30 working days to assess the notification and decide whether to “call-in” the acquisition for further scrutiny or clear it. Of the 766 notifications reviewed by the Investment Security Unit (the “ISU”), 55 (7.2%) were issued a call-in notice and 711 (92.8%) were notified that there would be no further action, showing that in the majority of cases the government is happy for transactions to proceed once the parties have complied with the initial notification obligation. This accords with our own experience of the regime so far.  

37 call-in notices resulted from mandatory notifications (6% of mandatory notifications were called in) and 17 resulted from voluntary notifications (12% of voluntary notifications were called in), indicating that a call-in is slightly more likely in the case of a voluntary notification. A further 10 non-notified transactions were issued a call-in notice (making 65 in total).

Call-in notices mainly concerned transactions in the Military and Dual-Use, Defence, and Advanced Materials sectors (with overlap between sectors in some cases).

Time periods

Once the government has accepted a notification it has 30 working days to decide whether to call in the acquisition for a more detailed assessment or to clear it. The 2023 Report states that this time limit was met in every case.

The average number of working days to call in a notification once accepted was approximately 27-28 working days (and mirrors our experience with the regime). This represents an increase on the 2022 Report which showed an average of 22-24 working days. Given a call-in notice is unlikely to be issued, in the majority of cases the parties to a transaction can expect the NSIA process to take no longer than 30 working days from the date it is confirmed that the notification is accepted.

Following a call-in notice and subsequent assessment, the government will either issue:

  • a final notification clearing an acquisition with no further action to be taken; or
  • a final order, imposing measures to mitigate risks to national security arising from the acquisition (e.g. conditions on acquisitions; preventing acquisitions from completing; or, if the acquisition has already taken place, requiring the parties to unwind the acquisition).

Called-in notifications are assessed in an initial review period of 30 working days which can be extended by another 45 working days (a total of 75 working days). The average number of working days between calling in an acquisition and issuing a final notification was 25 working days but the average number of working days between calling in an acquisition and issuing a final order was 81 working days. Further, the 2023 Report states the days reported may not reflect the actual number of calendar days and so it is possible for the assessment process to be extended well beyond the 75 working day period.

Final notifications and final orders

There were 72 called-in acquisitions put to the Secretary of State in the 2023 reporting period, including those that were not finally determined during the 3-month 2022 reporting period. Of these, the Secretary of State made 57 final notifications and 15 final orders (one final order was subsequently revoked, so the total number of final orders still in effect at the end of the reporting period was 14). The main sectors affected were Military and Dual-Use, and Communications (with 4 final orders each), as well as Energy, Defence, Computing Hardware, and Advanced Materials.

The government is publishing a running list of final orders made under the NSIA (which can be viewed here).

Out of the 15 final orders, 5 acquisitions were blocked or subject to an order to unwind the acquisition. Others have been allowed to proceed provided that certain conditions are met (for example reporting new customers to the government on an annual basis, or committing to keep certain activities of the target business in the UK). It is clear that the government is willing to use its powers broadly.

These final orders do not typically reveal key commercial details of the transaction such as the acquisition value, however they do set out the broad structure of the proposed deal and name the proposed parties. When a NSIA notification is first submitted, any would-be sellers and acquirers should be aware that this information may eventually be made public and their name may be associated with a proposed deal which was assessed by the government on the grounds of a national security risk.

Origin of investment

The 2023 Report chooses to disclose details of the origin of the investment for each notified transaction, a metric that was not included in the 2022 Report. The origin of investment depends on several factors such as the location of the immediate acquirer’s headquarters or the headquarters of its ultimate beneficial owner. An acquisition can therefore be associated with more than one jurisdiction.

The NSIA does not take an investor’s origin into account when determining whether a transaction will require notification or not. As such, UK investors are subject to exactly the same notification requirements as overseas investors. Indeed, the majority of notifications (58% of the total) related to UK investors, with the next largest source of notified transactions being the US. Notably, of the acquisitions called-in, 32% involved acquirers associated with the UK and 20% involved an acquirer associated with the USA.

Whilst the 2023 Report makes it clear that the NSIA applies equally to all acquirers and does not target any particular origin of investment, the data does indicate a particular sensitivity by the government to Chinese acquirers and investors. Only 5% of accepted notifications involved acquirers who were associated with China, whereas 42% of all call-in notices involved an investment from China. Whilst acquisitions associated with China received the highest number of final notifications (i.e. clearances), 8 out of the 15 final orders issued were related to acquisitions by entities associated with China (including four of the five prohibition/unwinding decisions).


No penalties for breaches of offences under the NSIA had been issued as at 31 March 2023. There were also no criminal prosecutions or judicial reviews of decisions under the NSIA.

Key takeaways

The 2023 Report sheds some helpful light on timelines, types of notifications, sector focus and origins of investors, which should provide a practical steer for parties to transactions and practitioners when assessing the impact of the NSIA on acquisitions. The publishing of additional information and metrics beyond the government’s statutory obligations is a welcome development in this regard, however aspects of the regime are still opaque, and its scope remains very broad. In particular, further guidance and clarity on how certain sectors are being interpreted by the ISU in practice would be welcomed.

Please get in touch with us to discuss the impact that the NSIA regime could have on your transaction.


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