Sally Staunton (White & Case) co-authored this publication

Introduction

The NSIA came into force in January 2022 and has since become a regular feature of transactions involving businesses with activities in the UK. Certain transactions in 17 sectors are subject to mandatory notification if a target carries on specified activities in any of those sectors of the economy, but the UK government has the power to review a wide variety of transactions. The regime is administered by the Investment Security Unit ("ISU") in the Cabinet Office, with the Chancellor of the Duchy of Lancaster (the "Chancellor") exercising final decision-making powers. Those powers include the ability to review qualifying transactions in any sector on an ad hoc basis, so voluntary filings can also be made if an investor would like absolute certainty that a transaction will not be retrospectively reviewed, a power that can be exercised for up to five years following closing.

Unusually, the NSIA is not a true "foreign" direct investment screening mechanism, as it applies equally to UK and foreign investors alike. Indeed, the first conditional decision issued under the NSIA in July 2022 imposed conditions on UK-based investor Epiris, in the context of its acquisition of the digital communications provider that supplies radio solutions to UK emergency services, Sepura. The regime also catches internal reorganizations (e.g., those that might be done to facilitate a transaction that itself would trigger a filing).

Summary of major developments in 2025

• The most significant development during 2025 was the launch of a consultation in July on changes to the NSIA Regulations that define which activities require mandatory notification under the regime. Following its review of the responses to that consultation, the government confirmed in March 2026 that these updates will be enacted via legislation later this year.
  • The introduction of a new sensitive sector for Water, capturing all of the regional water and/or sewage monopolies in the UK.
  • Creation of a standalone sensitive sector for Critical Minerals (rather than it being part of the Advanced Materials sector).
  • Activities related to Semiconductors would also move into a standalone section, in which the scope of activities triggering a mandatory notification would be significantly expanded. This would include the addition of activities involving wider design and analysis of semiconductors, chips, and processing units, as well as advanced packaging techniques.
  • Changes are also proposed within existing sensitive sectors including Advanced Materials, Artificial Intelligence, Communications, Critical Supplies to Government, Data Infrastructure, Energy and Suppliers to the Emergency Services. For further information on the specifics of these proposals, please refer to our previous overview here.
• The government also released its fourth report on the operation of the NSIA regime in July 2025, with a more detailed breakdown of sectoral and review trends. The key points include that the number of mandatory and voluntary notifications increased by nearly 27 percent and 12 percent, respectively, compared with the annual report for the previous 12 months. Similarly, the number of call-in notices increased to 56, compared to 41 during 2023 – 2024; however, as a proportion of the total number of notifications, this is largely consistent with 2023 – 2024, and it remains the case that clearance post-notification remains the norm. The defense sector is once again the sector with the most call-ins and final orders. For a deeper look at the lessons from that report, please refer to our in-depth analysis here.

Who files?

Mandatory notifications are filed by the investor. Voluntary notifications, however, can be filed by any party, including the investor, the seller, or the target itself.

Types of deals reviewed

The submission of an NSIA filing is not made public. Details of a specific transaction will be publicized only if the deal is ultimately blocked, unwound, or subject to conditions. In this case, a final order will be published, but the details will be limited to a brief summary of the parties, the transaction, and the decision that was made including brief details of the conditions imposed. Transactions that are cleared unconditionally, even after an extended review period, are not publicized, with the total number of notifications made public only in NSIA annual reports.

There have been seven prohibitions, including post-completion unwinding orders, since the inception of the regime. Although the regime is technically agnostic as to an investor's origin, requiring notifications even of British acquirers, of the seven prohibitions, six concerned investors from China or Hong Kong.

Two of these prohibitions ordered the unwinding of transactions that had already been concluded before the mandatory filing requirements under the NSIA came into force. This retroactive power to call in a deal for review ordinarily applies for up to five years from the date of the transaction, or six months from the date that the Chancellor became aware of the transaction.

As of the end of 2025, conditions have been imposed on 38 transactions. Of these, 11 conditional decisions were issued in 2025.

In terms of the sensitive sectors subject to conditional decisions in 2025, defense transactions are the most prominent. This is no doubt a function of the particular sensitivities of the sector, but also the breadth of activities captured under the defense heading, as this extends to a wide range of targets, including, for example, those with incidental access to military sites via cleaning or catering contracts.

Conditions vary by sector but have universally focused on behavioral rather than structural commitments. These have included requirements to implement enhanced security controls to protect sensitive information and technology from unauthorized access; requirements that certain key personnel or board members are pre-approved by UK government authorities; requirements that certain key personnel are UK citizens; restrictions on the sharing of certain target information, including with the investor; and commitments to maintain certain business activities in the UK.

Again, Chinese investors feature prominently in relation to conditional clearances. However, conditions have also been imposed in transactions with UAE, UK, US, and European investors.

Scope of the review

The scope of the review under the NSIA is three-pronged.

The ISU assesses "control risk," the level of control that will be asserted by the prospective investor. Less control merits less concern from a national security perspective, particularly where an investor is seeking to take a non-controlling stake. A mandatory filing can be triggered with a 25 percent equity or voting stake, so the level of the investment will affect the assessment of the control risk, as will any rights attached to minority shareholdings.

The ISU also examines "target risk," covering the nature of the target's activities and the extent to which the target's products or services are used, or could be used, in a way that raises a risk to UK national security. This may involve considerations such as proximity to sensitive sites as well as the specific nature of the target's activities. In practice, however, any target falling within the defined sensitive sectors will raise target risk considerations. Where targets fall within multiple sensitive sectors, this risk may be considered enhanced.

Finally, "acquirer risk" is assessed. This entails a review of the acquirer, including the ultimate controller. Specifically, the acquirer risk assessment will consider whether the acquirer "has characteristics that suggest there is, or may be, a risk to national security from the acquirer having control of the target." These characteristics include associations with states or organizations that may be considered hostile to the UK, although this concept is undefined. Helpfully, previous guidance has made clear that a history of passive or long-term investments may indicate low or no acquirer risk.

Review process timeline

The timeline under the NSIA runs from the date that the notifying party receives confirmation that the notification is accepted as complete. Best practice guidance stipulates that the ISU will seek to do this within five working days, but, in practice, confirmation can take longer than this.

Once this confirmation is received, the review process is divided into two parts: a 30-working-day review period that applies to all notified transactions, and a 30-working-day assessment period, which applies to any transactions that are subject to a "call-in notice" following the initial assessment period, indicating that they will be subject to more detailed scrutiny. The latter can be extended by another 45 working days if required. Any further extensions beyond this time period require the notifying party's consent. A notifying party will want to consider whether to agree to such an extension and will often do so, as it means that there is a greater chance of receiving (conditional) clearance rather than a prohibition.

How foreign investors can protect themselves

It is, of course, crucial to understand whether a transaction requires a mandatory notification. However, given the ability of the government to call in any transaction, it is sensible for acquirers to assess the risks associated with any transaction in which the target's activities may be considered sensitive (e.g. the acquisition of a stake under 25% or any asset acquisition which, strangely, is not covered by the mandatory notification regime). As this analysis is target-focused, due diligence of prospective targets early in a transaction timeline is very important and will depend to a large extent on good engagement with the seller.

So far, the focus in terms of probing transactions and imposing conditions has been on information ring-fencing and securing continuity of supply to critical services in the UK. Therefore, it is important to have a clear narrative in place around the control, information-sharing, and intentions that an investor has for a sensitive target in the UK.

In terms of transaction certainty, investors may want to consider judicious use of the voluntary notification option. For example, while mandatory notifications are required only with respect to share sales, asset deals that would otherwise trigger if structured as a share deal would be good candidates for voluntary pre-clearance. This also eliminates the prospect of a retrospective call-in after the transaction has closed.

For transactions that are subject to call-in review, it is notable that often there will be limited, if any, engagement with the ISU on the reasons for that call-in, including the nature of any risks identified. The ISU has the power to issue information and attendance notices but will not necessarily do so. Nonetheless, an investor always has the option to submit further information for the Secretary of State's attention that must be taken into account in the final decision under the provisions of the NSIA, and selective use of this option can help to allay potential concerns.

It is also important to keep in mind, however, that the vast majority of transactions will be cleared without a "call-in" review. In the April 2024 – March 2025 period (the last one covered by the annual report on the NSIA), of the 1,079 transactions reviewed by the ISU, less than 4.5 percent of notified acquisitions were called in.

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