National Security and Investment Act 2021: Annual Report 2022-23
Why linked: Matched expansion phrase: National Security and Investment Act 2021
Annual report on the implementation of the National Security and Investment Act 2021 covering 2022-23
The National Security and Investment Act 2021 created a standalone, sector-agnostic regime allowing the UK government to call in and, if necessary, block or condition acquisitions of entities or assets that raise national security concerns; mandatory notification is triggered when an acquirer crosses control thresholds in any of 17 specified sensitive sectors set out in SI 2021/1264.
The regime is the principal UK foreign investment screening tool, sitting alongside (but separate from) the public-interest merger control mechanisms of the Enterprise Act 2002; non-notification of a mandatory transaction renders the acquisition void and exposes the parties to criminal and civil penalties calibrated to worldwide turnover under SI 2021/1262.
The regime is operational since 4 January 2022, has been administered by the Cabinet Office's Investment Security Unit since the May 2023 machinery-of-government changes, and is now in a substantive review phase: a Call for Evidence (April 2024), a refreshed s.3 statement (May 2024), updated market guidance, and a 2025-26 consultation on amending the SI 2021/1264 schedules concluded in March 2026 with a Government response.
The refreshed statutory statement under s.3 setting out how the Secretary of State expects to exercise the call-in power, including risk factors for target, acquirer and control.
Specifies, across 17 schedules, the descriptions of qualifying entities and UK activities that trigger mandatory notification under s.6(2) — the operational heart of the mandatory regime.
Defines how worldwide turnover is calculated for purposes of the s.41 monetary penalty caps, including treatment of controlled businesses, sole traders and credit/financial/insurance institutions.
Sets the procedural rules for service of mandatory notices, voluntary notices and validation applications via the NSI electronic portal, and for service of orders by email/post.
Specifies the prescribed form and content of mandatory notices, voluntary notices and validation applications submitted under the Act.
Brought the substantive NSI regime into force on 4 January 2022 and preserved the operation of the Enterprise Act 2002 public-interest regime for transactions where intervention notices had already been issued.
Makes the Secretary of State's NSI Act functions concurrently exercisable with the Chancellor of the Duchy of Lancaster from 3 May 2023, formalising the move of the Investment Security Unit to the Cabinet Office.
Sector-by-sector guidance for parties on which acquisitions fall within each of the 17 mandatory-notification sectors specified in SI 2021/1264.
Practitioner-oriented guidance based on analysis of notifications received and stakeholder feedback, covering scope and procedural questions practitioners had raised.
Explains how to comply with the Act and what to expect if subject to orders, monetary penalties or criminal investigation.
Memorandum of Understanding governing coordination between the Investment Security Unit's NSI screening and the CMA's merger control jurisdiction in parallel cases.
Bespoke response to the Commons Business and Trade Committee setting out how the Committee's recommendations on the NSI regime would be addressed.
Letter to select committee transmitting and explaining the annual report; documents the Cabinet Office's ownership of the regime post-machinery change.
The foundational consultation response that shaped which 17 sectors were captured in the original SI 2021/1264 specification.
Original consultation on the section 3 statement concerning the use of the call-in power under the NSI Act.
Statutory annual report on the regime's operations for 1 April 2022 to 31 March 2023, providing volumes of notifications, call-ins and final orders by sector and acquirer-origin.
Annual report covering the regime's third operational year, published October 2024.
Annual report laid before Parliament in July 2025 by the Chancellor of the Duchy of Lancaster Pat McFadden.
Consultation seeking views on how the NSI regime could be made more business-friendly while maintaining national security protections; response published April 2024.
Response to the 2023 Call for Evidence, signalling targeted SI amendments, new guidance and a refreshed s.3 statement rather than wholesale primary legislation reform.
Consultation and Government response on proposed changes to the SI 2021/1264 specifications of qualifying entities — the substantive scope-of-mandatory-regime update following the 2024 Call for Evidence.
This consultation defined the scope of SI 2021/1264 — the central operationalising instrument for the mandatory regime.
First-order review consultation on the regime's design two years into operation; produced the suite of May 2024 guidance refreshes.
Directly amends the operationalising SI for the mandatory regime — the substantive scope-of-mandatory-regime update.
Shaped the s.3 statement that frames how the call-in power is publicly explained.
Our country has always been a beacon for inward investment and a champion of free trade
Why linked: Alok Sharma's Second Reading speech framed the NSI Bill as preserving the UK's openness to investment while creating a focused screening tool — the foundational political commitment for the regime
Security and prosperity go hand in hand – we need a strong economy to support our security, and the investment driving our economic growth needs to be secure.
Why linked: Pat McFadden's July 2025 written ministerial statement HLWS878 framing the Annual Report 2024-25 sets the current administration's NSI policy stance — broadly continuity with refinement
Why linked: Matched expansion phrase: National Security and Investment Act 2021
Annual report on the implementation of the National Security and Investment Act 2021 covering 2022-23
Why linked: February 2024 listing of the NSI Annual Report 2022.
Annual report on the implementation of the National Security and Investment Act 2022.
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The National Security and Investment Act 2021 regime is the UK's standalone foreign-investment screening tool, decoupled from public-interest merger control under the Enterprise Act 2002. The 17-sector mandatory specification in SI 2021/1264 1 is the operational heart of the regime, with monetary penalties calibrated to worldwide turnover under SI 2021/1262 2 and procedural rules in SI 2021/1267. Since 3 May 2023 the regime has been administered by the Cabinet Office's Investment Security Unit, with NSI Act functions exercisable concurrently by the Chancellor of the Duchy of Lancaster. The regime is now in a substantive review phase: the April 2024 Call for Evidence response, the refreshed May 2024 s.3 statement and Market Guidance, and the March 2026 consultation response on the Notifiable Acquisition Regulations 3 together set the direction of travel — targeted scope refinement and procedural improvements rather than wholesale primary-legislation reform.
The regime is operationally mature, in its fifth year of full operation since commencement on 4 January 2022 via SI 2021/1465. Annual reporting is now established as the principal public-accountability mechanism: Annual Report 2022-23 was laid in July 2023 by Oliver Dowden as Deputy Prime Minister, Annual Report 2023-24 followed in October 2024, and Annual Report 2024-25 was laid in July 2025 by Pat McFadden as Chancellor of the Duchy of Lancaster (HCWS878/HLWS878). The Section 3 Statement on the use of the call-in power was refreshed in May 2024, providing the current public framing of how target risk, acquirer risk and control risk are weighed. Supporting guidance was substantially refreshed in February and May 2024 — covering compliance and enforcement, the 17 types of notifiable acquisitions 1, higher-education and research-intensive sectors, extra-territorial reach, and new-build downstream gas and electricity assets — reflecting the Cabinet Office's response to the 2023-24 Call for Evidence on making the regime more business-friendly. The Cabinet Office-CMA Memorandum of Understanding remains the principal published inter-regulator coordination tool. Parliamentary scrutiny continues through the Business and Trade Committee (which submitted to the Call for Evidence and received a bespoke Government response in April 2024) and through PQs probing case throughput and statutory-deadline breaches.
The single most material development is the March 2026 consultation outcome on amendments to SI 2021/1264 1. The consultation response, published 12 March 2026 alongside HCWS1394 and HLWS1399 written ministerial statements, sets out targeted changes to the descriptions of qualifying entities across the 17 sectors — directly amending the operationalising regulations rather than reopening primary legislation. This follows the April 2024 Call for Evidence response which had signalled exactly this route. In parallel, the Cabinet Office continued to publish notices of final orders made, varied and revoked under the Act, with the May 2026 final-orders notice continuing to be the principal source of public case precedent. Annual Report 2024-25 (July 2025) provided the operational data underpinning the consultation. PQs in 2025 from Liam Byrne MP (volumes since 5 July 2024), Tan Dhesi MP (cases beyond the statutory clock) and Alistair Carmichael MP (China-related transactions) continued the pattern of parliamentary scrutiny that the regime now attracts.
Three near-term watchpoints will define how the regime evolves in the next 12 months. First, the amending regulations to SI 2021/1264 implementing the March 2026 consultation response 1 should be laid in 2026-Q2 — practitioners will need to map the redrawn 17-sector specifications against active and pipeline deals, particularly in technology areas (AI, semiconductors, advanced robotics) where the consultation flagged the largest case-volume issues. Second, the statutory three-year review obligation under reg.4 of SI 2021/1264 fell due before 4 January 2025; the corpus does not yet show whether a published review report has been laid, which is itself an open accountability question worth raising. Third, watch the case-throughput data in Annual Report 2025-26 (expected July 2026) for evidence of whether the Investment Security Unit has cleared the lengthening tail of cases breaching the 30-working-day statutory clock that PQs have probed — Tan Dhesi's March 2025 PQ was the most pointed parliamentary intervention on this. Beyond the formal calendar, M&A practitioners should also watch for any movement on parallel-filing coordination with the FCA and PRA on financial-services targets — the corpus contains the Cabinet Office-CMA MoU but no equivalent FSMA-side instrument, which is increasingly an execution-risk surface in cross-border financial-services deals. Finally, watch case-specific outcomes (and final orders) in cases that have been the focus of PQ engagement: Newport Wafer Fab/Nexperia treatment, Royal Mail/Vesa Equity, and any further Chinese-state-linked acquisitions.
The NSI Act 2021 is a self-contained, sector-agnostic foreign-investment-screening regime that deliberately decoupled national-security review from the general public-interest merger-control regime in Part 3 of the Enterprise Act 2002. Section 22 of the NSI Act amended the Enterprise Act so national security ceases to be a public-interest consideration triggering intervention notices in CMA mergers; instead, every transaction with a national-security dimension is funnelled into the NSI process, and SI 2021/1465 preserved Enterprise Act 2002 cases that were already underway when commencement took effect on 4 January 2022.
The regime operates on two parallel tracks. The MANDATORY track captures acquisitions of control over qualifying entities that carry on activities within the 17 sensitive sectors specified across Schedules 1-17 of SI 2021/1264 (advanced materials, advanced robotics, AI, civil nuclear, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum, satellite and space technologies, suppliers to emergency services, synthetic biology, transport). Non-notification renders the acquisition void as a matter of law and exposes parties to criminal offences and civil penalties up to the higher of £10 million or 5% of worldwide turnover, with turnover calculated under SI 2021/1262 on a controlled-business basis that aggregates parent and subsidiary turnover and applies bespoke rules for credit institutions, financial institutions and insurance undertakings. The VOLUNTARY track allows parties to notify any acquisition (within or outside the 17 sectors) where they are concerned the call-in power under s.3 may be exercised, with a five-year retrospective call-in window for non-notified transactions.
The doctrinal architecture layers on top of pre-existing UK regimes rather than displacing them. Acquisitions can simultaneously trigger CMA merger review under the Enterprise Act 2002, FCA/PRA change-in-control approvals under FSMA 2000 Part XII, Ofcom or Ofgem licence-transfer consents, and (in the nuclear sector) Nuclear Site Licence transfer approvals under the Nuclear Installations Act 1965. The Cabinet Office-CMA MoU formalises how parallel-filing cases are coordinated; comparable formal arrangements for other regulators are not visible in the corpus. The regime also overlays sector-specific export-control regimes (Export Control Order 2008) and, in defence supply-chain cases, List X security clearance regimes — Schedule 7 of SI 2021/1264 specifically captures critical suppliers to government holding SECRET/TOP SECRET material or with List X accreditation.
Decision-making sits with the Secretary of State, but the May 2023 Transfer of Functions Order (SI 2023/424) made all NSI functions concurrently exercisable with the Chancellor of the Duchy of Lancaster, formalising the Investment Security Unit's relocation from BEIS to the Cabinet Office. The s.3 statement (refreshed May 2024) sets out three families of risk factors — target risk, acquirer risk, control risk — that frame public expectations of how the call-in power will be exercised, without binding the Secretary of State to a closed list.
What the regime does NOT do is equally important. It does not impose a foreign-ownership prohibition or a country-of-origin filter (the regime is deliberately agnostic of nationality, endorsed by the Foreign Affairs Committee's July 2021 report). It does not pre-clear transactions for competition purposes — CMA review continues to run in parallel. And it does not capture corporate restructurings that fall below the s.8 control thresholds even where the underlying activities sit in the 17 sectors.
An entity carrying on activities in the United Kingdom or supplying goods/services to UK persons (s.7 NSI Act); the 17 schedules of SI 2021/1264 specify which descriptions of qualifying entities trigger mandatory notification
Acquiring shares or voting rights crossing 25%, 50% or 75% thresholds (s.8(2)), acquiring rights enabling material influence over policy (s.8(5)), or acquiring the ability to secure or prevent passage of resolutions (s.8(6))
The Secretary of State's power under ss.1-3 to call in a qualifying acquisition for national-security assessment, exercised in accordance with the published s.3 statement
An order under s.26 imposing conditions, requiring divestment or prohibiting an acquisition outright after assessment
An acquisition of control over a qualifying entity that falls within a description specified by regulations under s.6(2); the descriptions are in the 17 schedules to SI 2021/1264
Amending regulations to SI 2021/1264 implementing the changes signalled in the March 2026 Government response to the Notifiable Acquisition Regulations consultation
Refreshed sector-specific guidance to align with amended SI 2021/1264 schedules; the May 2024 Market Guidance noted future updates would track scope changes
Three-year statutory review obligation under SI 2021/1264 reg.4 — the first review report was due before 4 January 2025; check whether it has been published or is overdue
Following the May 2023 transfer of functions and the April 2024 Call for Evidence response, the Cabinet Office's stated position is that the NSI regime should be refined for business-friendliness through targeted SI amendments, refreshed guidance and a refreshed s.3 statement, rather than wholesale primary-legislation reform. The March 2026 consultation response confirmed targeted changes to the sector specifications.Mar 2026
As Bill minister and signatory of the original three operationalising SIs in November 2021, his stated position was that the 17-sector specification represented the proportionate scope of the mandatory regime, with the monetary-penalty turnover rules providing meaningful deterrence without being disproportionate.Nov 2021Nov 2021Nov 2021
During Bill stages, peers and MPs pressed for the ISC to be the principal vehicle for classified scrutiny of Investment Security Unit decisions; the Government resisted formal scrutiny duties beyond the annual report, and the s.61 annual reporting requirement was the compromise outcome.Apr 2021Apr 2021
The SLSC drew SI 2021/1262 and SI 2021/1264 to the special attention of the House in its 13th Report of session 2021-22, flagging policy interest and the breadth of the qualifying-entity specifications.Nov 2021Nov 2021