The Institute of Directors has urged the Government to ensure the
Department for Business (BEIS) has sufficient resources available
to be able to handle a huge increase in workload expected from a
new Bill designed to scrutinise foreign takeovers.
The Institute welcomed a Government amendment to the National
Security and Investment Bill which increases the stake threshold
at which the business secretary Kwasi Kwarteng’s department has
to be notified of a bid from 15% to 25%.
The Bill increases the Government’s ability to scrutinise and
intervene in business transactions. The IoD expressed fears about
the scope of the original legislation, the potential for
unnecessary delays and impact of increased bureaucracy.
The new amendment, which mirrors similar restrictions in the
United States, follows previous changes announced by the
Government which narrowed the list of foreign investments
included in its scope.
Dr Roger Barker, Director of Policy at the Institute of
Directors, said:
“The IoD raised concerns very early on about the potential impact
of the original proposals and it is encouraging to see the
Government listening and acting on those concerns.
“Striking the right balance between our national security and
avoiding unnecessary delays that could put investment at risk is
the right thing to do however we still have some concerns.
“The volume of transactions the Government has to approve will
still significantly increase and while this amendment and other
measures will help to alleviate that, it remains hugely important
that the business department has sufficient resources to handle
the increase in workload.
“There’s no doubt that backlogs could delay or even curtail
benign business transactions.”
Further detail
The National Security and Investment Bill, which is currently
being scrutinised by the House of Lords, vastly increases the
Government’s ability to intervene in business transactions on the
grounds of potential threats to national security.
The Government has said that the ‘powers will be exclusively for
use on national security grounds’, but has not defined national
security for the purposes of the Bill. As a result, the powers
could conceivably be used to target transactions on the basis of
a broad definition of national security, encompassing issues
relating to industrial strategy.
Under the Bill, businesses in a range of sectors will have to
make mandatory notifications ahead of ‘trigger events’ that would
see the change in levels of control of an entity or asset. In
addition, businesses can voluntarily notify Government of such an
event if they are outside these sectors but believe the
transaction may have implications for national security.
The Business Secretary can ‘call-in’ transactions they deem to
have a bearing on national security up to 5 years after the fact.
Non-compliance with the regime can lead to 5 years’
imprisonment.
The OECD has estimated that $750bn has flowed into the UK as a
result of FDI over the past ten years. In addition, the UK’s
reputation as a global centre for business investment contributes
to its attraction as a destination for the world’s most
entrepreneurial companies and directors.
