Government announces plans to intervene in deals that jeopardise national security

Government announces plans to intervene in deals that jeopardise national security
Even when deals involve smaller businesses

The government has announced proposals to increase its powers to intervene in mergers that raise national security concerns, even with smaller companies.

Measures to update the merger system and better protect national security have been set out by Business and Energy Secretary Greg Clark.

The changes are targeted at key areas, specifically companies that design or manufacture military and dual use products, and parts of the advanced technology sector.

In these areas, currently the Government can only intervene in mergers involving companies with a UK turnover of more than £70m or where the share of UK supply increases to 25% or over.

It said the plans will “close these loopholes to enable greater scrutiny of foreign investment in a changing market”.

The government said it will lower the threshold whereby ministers can scrutinise investment to businesses with a UK turnover of over £1m, and remove the requirement for a merger to increase a business’s share of supply of, or over, 25%.

The plans follow a planned £1bn-plus Chinese takeover of engineering firm Doncasters Group, which is based in Staffordshire and locates its forging business in Sheffield,which was called off earlier this year amid US security concerns over the company’s defence operations.

Dubai International Capital (DIC), Doncasters’ owner, has abandoned talks with Beijing Xinwei, a telecoms technology provider.

The decision was thought to have been motivated by indications from US officials that they would not approve the takeover.

At the time, it was unclear if concerns were raised over the sale by the UK Government, with ministers having stepped in over the sale to Chinese buyers of Sheffield Forgemasters, which makes parts for nuclear submarines in the Trident programme.

Business and Energy Secretary Greg Clark said: “Britain has and always has had a proud record of being open to the world as the foremost advocate of free trade. It is right that every so often the Government reviews its mergers regime to close loopholes where they arise and this is what these proposals do in the area of national security.

“No part of the economy is off-limits to foreign investment and the UK will continue to be a vociferous advocate for free trade and a magnet for global talent.”

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