Review of NSI Act investment screening regime promised - again

The UK government has announced a review of the National Security and Investment Act 2021 (NSI Act), with the intention of ensuring that its requirements are “targeted and proportionate”. The announcement came as part of the government's industrial strategy, published on 23 June 2025. Reporting on the proposals, the Financial Times suggests that potential investors, and their advisers, are critical of the NSI Act regime and regard it as contributing to the slowdown in M&A activity. 

Background

The NSI Act allows the government to scrutinise and potentially intervene in certain transactions on national security grounds. A key feature of the regime is that qualifying acquisitions in 17 prescribed sectors are subject to mandatory notification. If the parties complete a qualifying acquisition in a prescribed sector without obtaining the approval of the Secretary of State, the transaction will automatically be void. Parties to qualifying acquisitions outside those sectors may voluntarily notify them for clearance if the parties are concerned that they might otherwise be called in for assessment. 

What will the review cover?

• a 12-week consultation on updating the definitions covering the 17 prescribed sectors
• updating guidance to ensure there is clarity for investors on the NSI Act, including the decision-making process
• specific new exemptions to the mandatory regime, to be announced shortly
• exploring opportunities to to bring greater transparency to the process and and ensure that it protects national security while minimising burdens and supporting growth

Sounds familiar…?

If this rings bells, that's because the previous government also consulted on the impact, scope and operation of the NSI Act regime. It updated some aspects, such as the “Section 3 statement” outlining the factors that the Secretary of State will take into account in assessing national security risk, and published some updated guidance. By the summer of 2024 it had intended to launch a formal consultation on updating the scope of the 17 sensitive areas. It noted that respondents to the review had requested greater guidance and clearer definitions, in particular in relation to AI, Advanced Materials, Defence and Critical Suppliers to Government. The further consultation was to have included proposals for a standalone Semiconductor sector and a Critical Minerals area. The then government was also considering the inclusion of the water industry as a mandatory notification sector. It will be interesting to see how much of this will feature in the present government's review proposals.