Government to protect key UK firms from takeovers that threaten national security

UK defence aerospace firm Cobham's takeover went through last year despite some concerns about its sale to a US firm

The government is to introduce a bill shortly that updates its powers to block foreign takeovers of UK firms if they threaten national security.

The National Security and Investment Bill will allow it to curtail deals where it decides there are unacceptable risks to the UK.

The new powers could halt foreign takeovers, even retrospectively.

It follows recent concern about the activities of some foreign companies, notably China's Huawei.

Pressure from some MPs forced the government to reverse plans allowing the Chinese tech giant to supply the UK's 5G mobile network.

The proposals mean that companies from any country that plan a takeover in 17 key sectors, including energy and cryptography, will be required to tell the government their plans.

There have been only 12 government interventions in foreign takeovers on national security ground since 2002 and this is the first update in 20 years.

'Real step change'

The UK has long been seen as more "open for business" when it comes to foreign firms seeking investment than other countries, such as France, Germany and the US.

It said in a statement that the updated rules would bring it more into line with theirs.

Nicole Kar, UK head of competition law at Linklaters and a specialist adviser to the Commons Foreign Affairs Committee, said the rules were "a real step-change in terms of government powers".

"There's been a lot of concern around foreign investors buying up start-ups."

She said there were regrets in government that some businesses had been allowed to be taken over: "I think there's a real feeling in the government that more needed to be done."

Business Secretary Alok Sharma said: "The UK remains one of the most attractive investment destinations in the world and we want to keep it that way.

"But hostile actors should be in no doubt - there is no back door into the UK."

Companies that do not comply with the new law will face sanctions including fines of up to 5% of worldwide turnover or £10m, whichever is the greater, and even imprisonment.

Last year, Boris Johnson was forced to defend the controversial £4bn takeover of UK defence and aerospace company Cobham by a US private equity firm.

He said at the time it was "very important we should have an open and dynamic market economy".