Business Secretary, Kwasi Kwarteng, certainly seems impressed with the statistics in the first National Security and Investment Act Annual Report, which was published last month, but with the report only covering the first three months of the new system, does it provide us with an accurate picture of the regime's effectiveness? 

The National Security and Investment Act 2021 (the "Act") came into force on 4 January 2022, permitting the government to review and intervene in certain acquisitions which were of potential threat to the UK's national security. Although the government has the power to "call-in" a transaction of its own volition, parties to a transaction must consider their notification obligations prior to completing; share acquisitions over and above specified percentage thresholds must be notified to the government's Investment Security Unit ("ISU") if the target entity is involved in one of 17 sectors, while other acquisitions (including those not involving shares) may be notified.

The Act requires the government to publish an annual report setting out certain information about the notifications received. Ordinarily, this report will cover the 12-month period, 1 April to 31 March in any given year, but given that the Act only came into force at the start of the year, this first report only covers the period 4 January to 31 March. 

In total, 222 notifications were made during the period, with the vast majority of these (196) being mandatory notifications, 25 being voluntary notifications and one being a retrospective validation application (i.e. the acquisition had already completed and validation was being sought). Of the total notifications, only 17 were then "called-in", three of which were cleared and 14 of which were still being assessed at the end of the report period. The five most common sectors for mandatory notifications were defence, military and dual use, critical suppliers to the government, AI and data infrastructure. 

The report does point out several times that long-term trends cannot yet be ascertained and that there may be peaks and troughs of activity throughout the year (a concept of which all M&A lawyers will be only too well aware). It is interesting to note however, that so far, the plethora of " just in case" notifications anticipated by many prior to the Act coming into force, do not yet seem to have materialised and in fact, the number of notifications made during the report period is actually quite a lot lower than the government was expecting. Unfortunately, we will have to wait 12 months to see the figures for a full year of notifications and call-ins, but with the ISU having now called-in its first two transactions (see https://insights.forsters.co.uk/post/102hpoc/called-into-question), next year's report may give us a little more to chew over.