Fifth Annual Report on the UK National Security and Investment Act published

The Report summarises how the NSI Act regime operated in the period from 1 April 2025 to 31 March 2026 (the “Reporting Period”). While the Report does not comment on substantive matters, the statistics presented in the Report provide helpful context on processes and timelines. The Report also indicates where the UK Government’s focus has been during the Reporting Period. In summary:

• the number of notifications has continued to increase year on year, up c.16% from the 2024 - 2025 reporting period, and up 46% from the 2023 - 2024 reporting period;

• of a total of 1,324 acquisitions notified, only 9 acquisitions were subject to a ‘Final Order’, down from 17 in the previous reporting period, with 8 cleared subject to remedies and just 1 prohibited outright;

• the period from notification to acceptance of the notification as ‘complete’ (which starts the formal review process) has increased, with median acceptance periods rising from 7 to 11 working days for mandatory notifications, and from 8 to 13 working days for voluntary notifications (which is in line with our own experience);

• this aligns with international trends, whereby FDI timelines have in some cases proven more challenging and unpredictable than those under merger control regimes (see DealSCREEN for more detail on this); and

the UK Government has reiterated its commitment to updating the scope of the notifiable sectors, improving the forms that are used to submit notifications, and adapting legislation to exempt some acquisitions (including internal reorganisations which are currently still in scope). For dealmakers, the key message continues to be to consider potential application of the NSI Act early in any given deal process given the potential impact on timeline.

The key figures and takeaways from the Report are set out below.

Number and types of notifications

The NSI Act contains a mandatory notification requirement for acquisitions of UK target companies who are active in at least 1 of 17 “sensitive” sectors. A voluntary system sits alongside this, whereby acquisitions can be notified where they fall outside of the mandatory system in the interests of business certainty, given that the Investment Security Unit (“ISU”) holds a residual power to review unnotified acquisitions post-completion (and can ultimately order divestment, or impose other remedies).

If a notifiable acquisition completes without clearance, it is legally void. It is possible to submit a retrospective notification to remedy the voidness, albeit fines can still be imposed in these circumstances.

The Report shows that the ISU received 1,324 notifications in the Reporting Period, a c.16% increase as compared to the previous reporting period. Of these notifications, 85% were mandatory notifications, c.11% were voluntary notifications and c.3% were retrospective notifications.

The number of voluntary notifications increased from 134 in the previous reporting period to 147 in the Reporting Period. This remains a substantial number and may suggest that some businesses continue to exhibit a degree of risk aversion, particularly where acquirers wish to avoid the reputational and commercial consequences of a potential retrospective “call-in”.

The proportion of notifications that were retrospective fell slightly from 4% to c.3%, representing a decrease from 52 to 42 retrospective notifications.

“Call-in” notices for further assessment

The UK Government also has the power to ”call-in” acquisitions for further in-depth investigation if it reasonably suspects that a qualifying acquisition may give rise to a risk to national security. In the Reporting Period, the proportion of acquisitions reviewed by the ISU that were cleared in the initial review period (i.e. without being ‘called-in’) remained stable at approximately 95%, as is consistent with the previous reporting period.

Although the number of notifications increased in this Reporting Period, the UK Government issued 7% more ‘call-in’ notices than in the previous reporting period. Of the 60 ‘call in’ notices issued, 6 related to non-notified acquisitions. This demonstrates that the ISU continues to monitor the market for acquisitions that may raise national security issues.

11 “call-in” notices were issued following voluntary notifications, which is perhaps unsurprising as, in our experience, a voluntary notification is most likely to be warranted where the nature of the target business, or the nationality of the acquirer, is such that it is expected to attract more in-depth scrutiny.

Final outcomes

Following a “call-in”, notice the UK Government will either clear the transaction through a Final Notification or issue a Final Order prohibiting the deal, requiring it to be unwound or imposing remedies to address identified national security risks.

Of the 60 acquisitions called-in for detailed assessment during the Reporting Period, 44 (73%) were ultimately cleared without remedies. This may provide some reassurance to parties whose transactions become subject to a call-in notice.

In the Reporting Period, 9 acquisitions were subject to a Final Order, down from 17 in the previous Reporting Period. Of these, 8 were cleared subject to remedies and 1 was prohibited. The prohibited transaction concerned the proposed transfer of graphene-related technology and intellectual property to a joint venture involving a Chinese investor. The Government concluded that prohibition was necessary and proportionate to address national security risks relating to graphene technology with potential dual-use applications. The case highlights the particular sensitivity of transactions involving advanced technologies and strategic know-how, especially where access to intellectual property could give rise to national security concerns.

Overall, the figures suggest that, while most called-in transactions are ultimately cleared, the Government remains willing to intervene where it identifies national security concerns. In practice, intervention is far more likely to take the form of remedies than outright prohibition. Nevertheless, prohibitions remain a credible outcome where the Government considers that national security risks cannot be adequately addressed.

Timing

The ISU reached a decision to clear or ‘call-in’ each acquisition within the initial 30 working day period on all occasions during the Reporting Period, with the average decision being made within 29 working days, as is consistent with the previous reporting period. This suggests that the ISU has reached a relatively settled operational rhythm, with the initial review phase now routinely using almost the full statutory review period.

One notable development in the Reporting Period is the increase in the period from notification to when the ISU accepts the notification as complete (which starts the formal review period). The median time taken to accept a mandatory notification increased from 7 to 11 working days, while the median time taken to accept a voluntary notification increased from 8 to 13 working days. For transaction planning purposes, this is significant: parties should factor in a longer pre-acceptance period when building their deal timetables, and should be prepared for the possibility that initial submissions may require supplementary information before the 30-day review clock begins to run.

For acquisitions that were “called-in”, the average time from the issue of a “call-in” notice to a final decision within the statutory review process (excluding periods during which the statutory timetable was stopped) was:

• 24 working days for a Final Notification; and

• 69 working days for a Final Order.

The Report notes that all decisions were taken within the applicable statutory time limits, providing welcome certainty for businesses. However, these figures reflect only the periods during which the statutory review clock was running. The ISU can pause the review timetable through the use of Information Notices, and may ask parties to agree to voluntary extensions during the assessment process. As a result, the overall elapsed time from a call-in notice to a final decision can, in practice, be substantially longer than the nominal 105 working day statutory timetable (which is in line with our previous experience of in-depth reviews, including those involving remedies). Parties should therefore build appropriate contingency into their transaction timetables.

Areas of the economy

Acquisitions can often be associated with more than 1 of the 17 sensitive sectors of the economy. In the Reporting Period, a significant number of the acquisitions “called-in” for further assessment related to Defence (47%), Critical Suppliers to Government and Military and Dual-Use (both on 33%). These sectors were closely followed by Data Infrastructure, Advanced Materials and Suppliers to the Emergency Services.

8 sectors of the economy were represented in the 9 Final Orders issued in the Reporting Period, but most frequently in Advanced Materials, Data Infrastructure and Military and Dual-Use. This demonstrates that NSI Act scrutiny continues to be concentrated in sectors linked to defence capability, critical infrastructure and the provision of essential goods and services. Compared with the previous reporting period, when Defence was associated with more than half of all Final Orders, the latest data suggests a somewhat broader distribution of intervention activity across different sectors of the economy.

Origin of investment - nationality of acquirer

Acquisitions involving Chinese acquirers accounted for just 2% of accepted notifications in the Reporting Period yet were associated with 30% of “call-in” notices. This continues a trend seen in previous reporting periods and highlights the heightened scrutiny that transactions involving Chinese investors may attract under the NSI regime.

The origins of investment associated with the highest number of Final Orders present a more mixed picture, with China, Germany and the USA featuring most prominently. Four notifications were withdrawn, of which two were associated with the UK and one each with China, Turkey, the UAE and the USA. Taken together, these statistics do not appear to be deterring investment activity as parties continue to engage with the regime even where the nationality of the acquirer may attract additional scrutiny.

Amendments to the mandatory notification regime

The UK Government has reconfirmed its intention to introduce amendments to the mandatory notification regime. We previously reported on these changes (see our briefing here). In summary, the key proposed amendments include:

• AI sector: Removing "off-the-shelf" AI activities from mandatory notification requirements whilst retaining coverage of businesses developing or modifying advanced AI.

• Water sector: Bringing major water operating companies within the scope of mandatory notification. Acquirers of water utilities will need to factor this into their regulatory assessments.

• Semiconductors and critical minerals: Creating separate categories for semiconductors and critical minerals. This reflects the growing strategic importance of these materials and supply chains and aligns with broader international trends in FDI screening.

• Lower-risk transaction exemptions: Exempting certain lower-risk transactions, such as internal reorganisations, from mandatory notification requirements. This is a pragmatic refinement that should reduce the administrative burden on groups undertaking routine corporate housekeeping.

These amendments signal a maturing of the regime, with the UK Government seeking to calibrate the scope of mandatory notifications to focus resources on genuinely sensitive transactions, whilst reducing friction for lower-risk deals. We continue to monitor these developments.

International FDI Trends

The trends observed under the UK NSI regime are part of a broader global phenomenon. National security and foreign direct investment (“FDI”) screening continue to expand, with governments increasingly scrutinising transactions involving strategic sectors such as semiconductors, AI, critical technologies and other sensitive industries. This is consistent with the UK’s proposed amendments to expand the scope of the NSI regime in a number of strategically important areas.

Our DealSCREEN data shows that FDI filing volumes are outpacing merger control filing volumes, reflecting the increasingly broad reach of FDI regimes. For businesses engaged in cross-border M&A, understanding and coordinating multiple FDI filing requirements is an essential part of transaction planning. DealSCREEN is an invaluable tool for navigating this landscape, providing real-time insights into regulatory developments and helping to identify potential filing triggers at the outset of a transaction.

For further resources on FDI and National Security Law, please visit our hub. Please also see our separate briefing on FDI in the EU here.