Developing Trends From The Latest Annual Report On The UK National Security And Investment Regime

On 22 July 2025, the UK Cabinet Office published the fourth Annual Report on the National Security and Investment Act 2021 (NSIA) (the Report). The Report provides summary information and statistics relating to the review of transactions and investments on national security grounds in the UK during the period 1 April 2024 – 31 March 2025.

The Report was published on the same day as the UK Government's announcement of a consultation (commencing immediately) regarding proposed amendments to the National Security and Investment Act 2021 (Notifiable Acquisitions) (Specification of Qualifying Entities) Regulations 2021. We have discussed this in detail here.

The overall tone of the Report and accompanying Press Release is that investors can expect change to the regime, with a lessening of red tape where appropriate. This follows an acknowledgement from the UK Government that its tool kit in this space should "keep pace with the modern economy" and that change should stem from a pragmatic and industry-aware approach. Businesses are set to play a central role in moulding the regime as the consultation progresses.

A reduction in the burden placed on businesses will certainly be welcomed in circumstances where NSIA notifications have increased year-on-year since the regime was introduced. Since entering into force on 4 January 2022, the NSIA regime continues to be one of the most active foreign investment screening regimes globally. This trend has, unsurprisingly, continued in the period covered by the Report, with the level of notifications continually growing:

Increased notifications, but proportion of call-ins remains low

The Report shows that notifications have grown by over 25% when compared with the prior 2023-24 Report. In line with 2023-24 data, the Report suggests that the Government remains comfortable clearing transactions during the initial 30 working day period, with only 4.5% of transactions being called-in for further review and of those notifications reviewed, 95.5% were cleared with no further action being taken. This trend of the large majority of notifications being cleared without further action echoes the Government's view that the "vast majority of inward investment continues to pose no threat to the [the UK's] national security".

As in previous years, most of the notifications made in 2024-25 were mandatory notifications. That said, there has been a further decrease in the proportion of voluntary notifications when compared to 2023-24 (approximately 11% of notifications were voluntary in 2024-25, when compared to around 13% in 2023-24). In our view, it is still too early to draw any definitive conclusions from this decrease and, as noted in our commentary on the 2023-24 Report, investors should remain cautious in their approach when deciding whether or not to submit a voluntary notification, particularly when a deal is likely to raise national security concerns, thereby increasing the risk of a non-notified transaction being called-in by the Investment Security Unit (ISU) on its own initiative.

There was a small change in the proportion of notified transactions that were called-in for in-depth investigations – 4.5% when compared to 4% in 2023-24. Overall, only 56 transactions were called-in for further assessment, 16 transactions were issued with final orders (allowing them to proceed with conditions) and only one transaction was ordered to unwind.

This data confirms that most transactions notified under the NSIA regime will be treated as unproblematic, and that the Government will continue to take a targeted approach to further scrutinise only those transactions which raise material security concerns.

Scrutiny of transactions involving acquirers associated with China has declined slightly

The Report highlights a slight decline in called-in acquisitions involving acquirers associated with China. Out of the 56 acquisitions that were called-in, the largest proportion involved UK associated acquirers (48%), followed by China (32%), the United States (20%) and the United Arab Emirates. When compared to the 2023-24 Report, Chinese associated acquirers were involved in 41% of called-in transactions during that period. This slight decline is not likely indicative of any trend reversal and may be attributable to several factors, including geopolitical realities and deal fluctuations and a possible deterrence effect leading Chinese acquirers to reconsider potential acquisitions altogether.

Defence, military and dual-use and advanced materials are sectors most at risk of call-in

Transactions in the defence sector continued to be most likely to be called-in, accounting for 36% of all call-in notices issued in 2024-25 (an increase of 2% from the previous year). Other sectors with high call-in statistics were military and dual-use (29%) and advanced materials (27%) (broadly similar percentages to 2023-24). A similar picture emerged yet again for these industries regarding final orders.

There appeared to be less of a focus on calling in transactions involving R&D and communications as there was in 2023-24. Energy and artificial intelligence have taken the place of these sectors in the Report as the fourth and fifth most popular sectors for call-ins to be issued respectively.

The review timeframes for called-in notifications have increased

In line with the 2023-24 Report, most transactions reviewed during the reporting period (almost 96%) were cleared within the initial 30 working day period. The foreword describes this as a "testament to a system that is working". Investors can take comfort in the fact that clearance (in a timely fashion) remains a trend that we are seeing with the NSIA regime. Coupled with what could hopefully be a lessening of the administrative burden placed on investors following the UK Government's consultation, this is a trend that should continue to benefit investors.

Nonetheless, review timeframes can be significantly longer for the minority of cases where a transaction is called-in for an in-depth investigation, as requests for information, or an attendance notice by the ISU, will "stop the clock" on the statutory review period. Importantly, the average number of days between calling in a notified or a non-notified acquisition and issuing a final order has increased when compared to 2023-24. The Report notes that it took on average 70 statutory working days (but 99 calendar working days) between calling in an acquisition and issuing a final order. Comparatively, in 2023-24, it took on average 56 statutory working days (or 79 calendar working days) between calling in an acquisition and issuing a final order.

The Report cautions against drawing conclusions about trends relating to the time taken between calling in an acquisition and issuing a final order owing to the smaller number of final orders in the 2023-24 reporting period (only 5 orders). While a trend cannot be confirmed per se, the direction of travel of the data surrounding the speed of decision-making has slowed to a degree.

There was also a significant increase in the number of cases in which the 45 statutory working day "additional period" to extend the in-depth assessment period following call-in was used (21 times, compared to 12 times in the previous period), which may have contributed to the longer total review period for transactions requiring a final order. There was a nominal decrease in the number of cases which used the further "voluntary extension period" (2 times, compared to 3 times in the previous period).

The ISU remains vigilant in its review of non-notified transactions, with an increase in non-notified transactions being called-in

The ISU continues to proactively monitor market intelligence and has the power to initiate a review into a non-notified transaction on its own initiative. Of the 56 transactions called-in for review during the period covered by the Report, 7 related to non-notified transactions (12.5%), when compared to around 9.8% of called-in transactions in 2023-24.

While the number of non-notified transactions which are called-in remains small, it is nevertheless important that investors do not underestimate the risk of not making a notification, especially in situations where there is uncertainty concerning whether a transaction may give rise to a potential risk to UK national security and therefore, may be called-in for review in any event.

The path forward – navigating the ongoing consultation and possible amendments to the NSIA regime

With the recently announced consultation now ongoing, investors operating in sensitive sectors should prepare for possible changes to the NSIA regime. As discussed in our blog post on the consultation, "the Government estimates that the changes may reduce the number of mandatory filings by up to 10 per year, but that they may increase that number by up to 35". While upcoming changes will largely relate to the scope of sectors requiring mandatory filing under the NSIA, it is unclear at this stage what this will mean in practice and investors are encouraged to submit their views about the impact of the proposed changes on deal deliverability as part of the ongoing consultation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.