Tuesday 2 March 2021
Business, Energy and Industrial Strategy
National Security and Investment: Mandatory Notification Regime Consultation Response
Today, the Government published their response to the consultation on secondary legislation to define the sectors subject to mandatory notification under the National Security and Investment Bill.
This Government are a champion for free trade, recognising that inward investment is economically highly beneficial. Investment in UK plc boosts productivity by backing businesses to create good jobs and develop skills and will help support our economic recovery from covid-19. The UK is open for investment, but not for exploitation.
An open approach to international investment must also include appropriate safeguards to protect our national security and the safety of our citizens. The UK and our allies face continued and broad-ranging hostile activity from foreign intelligence agencies and others, who seek to compromise our national security. When it comes to investment, we are seeing novel means to undermine the UK’s national security that go beyond traditional mergers and acquisitions and also go beyond the reach of our current powers, such as structuring deals to obscure who is behind them. Such behaviour, left unchecked, can leave sensitive UK businesses vulnerable to disruption and espionage. It is crucial that the Government are able to fully combat these threats.
The National Security and Investment Bill creates a new screening mechanism enabling the Government to intervene in acquisitions resulting in control over entities and assets that may pose a risk to national security.
Proposed acquirers of certain shares or voting rights in specified qualifying entities in the most sensitive sectors of the economy will be required to notify the Secretary of State and receive clearance before completing their acquisition. This is to ensure that the Government are informed of potentially sensitive acquisitions before they take place and are thus able to take action ahead of time to address any risk to national security that would arise on completion. This “mandatory regime” is supported by a voluntary notification option for relevant acquisitions across the rest of the economy and a power for the Secretary of State to scrutinise qualifying acquisitions that have not been notified.
The overwhelming majority of transactions will, though, be unaffected by these new powers. We estimate that less than 1% of all mergers and acquisitions and asset transactions will result in a notification to Government.
The consultation invited views on the sectors in scope of mandatory notification, sought responses on whether the definitions provided sufficiently clear parameters to inform businesses and investors of the need to notify, and whether the definitions were proportionate. The consultation set out the draft definitions of 17 sectors in which national security risks are more likely to rise than in the wider economy.
These sectors are:
Critical suppliers to Government
Critical suppliers to the Emergency Services
Military and dual-use
Satellite and space technologies
Responses to this consultation suggested that many of the sector definitions were broad in scope and would require further specificity to enable acquirers to identify whether they would be in scope of mandatory notification. After careful consideration of all the responses, the Government intend to refine the definitions and have produced the next iteration of the definitions in today’s publication.
The Government intend to carry out further, targeted engagement with certain sectors to finalise these definitions. The final definitions will be set out in regulations following Royal Assent to the Bill.
This approach will ensure that the regime is targeted and proportionate and keeps Britain firmly open for business. It will bring us into line with other countries, such as the USA, whose Committee on Foreign Investment also operates a mandatory notification model that investors will be familiar with, and build on the best practice established around the world by like-minded countries.
In summary, it will deliver a balanced regime that provides the Government with the flexible powers they need while keeping our country firmly open to investment.
I will place a copy of the consultation response in the Libraries of both Houses.
Trade and Agriculture Commission Report
Last year, the Government established the independent Trade and Agriculture Commission (TAC) to place UK farming at the heart of our trade policy.
Today the Commission publishes its advisory report on trade and agriculture. The report makes recommendations covering:
The strong action needed to maximise export promotion opportunities for the agrifood sector.
The UK leadership required at the WTO to change international framework rules on trade and standards, to tackle global issues like climate change and environmental degradation.
The UK promoting free and fair trade while maintaining high standards in areas such as animal welfare, ethical standards, and the environment.
The UK being particularly supportive of developing countries to access the full benefits of the global trading system.
Welcoming the statutory Trade and Agriculture Commission to help uphold effective scrutiny of trade deals.
In compiling this advisory report, the commission sought evidence from trade and agriculture experts from across our four nations, including from local farmers, businesses, the National Farmers’ Unions and parliamentarians.
I am grateful to all those who contributed evidence and expertise during this challenging time. I thank the chair, Tim Smith, and all commission members for delivering this incisive advisory report and I look forward to carefully considering the recommendations and will respond in due course.
To continue the excellent work that the Commission has started, we are now putting the Commission on a statutory footing and evolving its role to boost scrutiny of new free trade deals. We will seek to appoint new members in due course.
In addition, last week I launched our Open Doors campaign to help farmers and producers take advantage of the 64 trade deals we have done to date, to sell more around the world including in fast-growing markets in the Americas and Asia Pacific.
A copy of the advisory report has been placed in the Libraries of both Houses and has been published on www.gov.uk.
Work and Pensions
Pension Schemes Act
The Pension Schemes Act 2021 received Royal Assent on 11 February. We are now setting out next steps, delivering on the commitment made during the passage of the Pension Schemes Bill and following extensive engagement since report stage in the House of Commons. The Act will introduce:
Three new criminal offences, including a sentence of up to seven years in jail for bosses who plunder or run pension schemes into the ground.
The legislative framework needed to usher in pensions dashboards that will give savers greater control over, and awareness of, their pensions.
The legislative framework to allow collective money purchase pension schemes to operate.
Powers to require pension schemes to take the Paris agreement temperature goal into account, and other climate change goals set by the Government.
Strengthened rules around pension transfers to prevent members being misled in relation to transferring their pensions pots.
Measures to support trustees and employers to improve the way they plan and manage scheme funding over the longer term and enable the Pensions Regulator to take action more effectively to protect members’ pensions.
We are now progressing the secondary legislation to ensure the UK’s pension system is safer, better and greener. The sequencing of the subsequent legislation will allow for proper consultation, engagement with key stakeholders and further parliamentary debate, through affirmative procedure where required.
Following our consultation in January 2021 on climate change, we will lay these world-leading regulations this summer to come into force ahead of COP26. This will make the UK the first major economy in the world to legislate for, and bring into practice, the recommendations of the Taskforce on Climate-related Financial Disclosures, ensuring climate change is at the heart of the pensions system.
On the Pensions Regulator’s powers, we will consult on the majority of draft regulations this spring, and will commence these powers and the criminal offences measures in the autumn. For the duty to give notices and statements to the regulator in respect of certain events, we will consult on the draft regulations later this year, for commencement as soon as practical thereafter.
In early summer we plan to consult on draft regulations for scams and collective defined contribution schemes, with commencement on the scams measures from early autumn 2021.
We aim to consult on proposed regulations for the pensions dashboard later this year and lay draft regulations before Parliament for debate in 2022. Delivery remains on track for 2023 in line with the plans published by the pensions dashboards programme.
On defined benefit scheme funding, later this year we will consult on draft regulations, following promised engagement with key interested parties, working closely with colleagues at the Pensions Regulator as they develop the revised funding code, which will also be subject to a full public consultation.
Both Ministers and regulators will continue to engage with both Houses of Parliament as these measures progress.