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UK ministers used national security powers to intervene in eight transactions involving Chinese-linked investment in British companies in the past year, underlining their concern over the potential for Beijing to gain influence over vital industries.
Figures published by the Cabinet Office on Tuesday showed that 866 deals were referred to the government under the National Security and Investment Act in the year to March 31, 2023.
Introduced in 2021, the law is designed to protect British interests in 17 sectors, including energy, defence and communications. It gives the government powers to block investments deemed to pose a threat to national security or to require remedies to protect the UK’s interests.
The act came into force partly because of concerns about Chinese investors buying up UK companies and other British assets.
Ministers used these powers to call in 65 investments during the 12-month period, according to a report published by the Cabinet Office. It did not disclose which transactions were affected.
More than 40 per cent of the call-in notices related to investments associated with China, more than any other country. One-third of deals subject to closer scrutiny involved acquirers associated with the UK, while one-fifth involved US-linked investors.
Most transactions scrutinised by officials were cleared, but 15 were the subject of a final order, under which the government intervenes.
Of these, five were blocked or forced to be unwound, with parties involved in the other 10 forced to adopt remedies to mitigate risks to national security.
Some eight of the final orders related to investments linked with China, compared with four associated with the UK, three with the US and one each with Luxembourg, Jersey, the UAE, the Netherlands and Russia.
The figures came as Oliver Dowden, deputy prime minister, described China as the “largest state-based threat” to Britain’s economic security.
“I’m very clear that I do not want us to decouple from China; I don’t think it’s in our interest,” Dowden told the BBC. The focus on Chinese-linked deals was also explained partly by the country’s size, he said.
“But at the same time, we have to be clear-eyed about protecting our national security, just in the same way that the Chinese are,” he added.
Ministers intervened four times in each of the communications and the military and dual-use sectors — more than any other area of the economy. They intervened in three deals in each of the energy, defence, computing hardware and advanced materials sectors.
Corporate deal advisers have warned that the national security rules risk having a chilling effect on inward investment and that the vetting process is too opaque.
Dowden told the Financial Times in April that he wanted to be “more open and transparent” about how deals are scrutinised.
“I want to engage properly [to show that] Britain is and should remain open for business and for investment,” he said.
