Government gets power to block takeovers of UK companies

The government will be given more powers to block overseas takeovers that could pose a threat to national security across all sectors of the British economy.

The new proposals were announced on Tuesday by business secretary Greg Clark in a national security investment white paper aimed to protect the UK’s most important and technically advanced businesses.

Clark said merger and takeovers rules need to be responsive to technological, economic and national security changes.

"These proposals will ensure we have the appropriate safeguards to protect our national security whilst ensuring our economy remains unashamedly pro-business and open to high levels of foreign investment in the future," he said.

The reform was spurred by the £24bn takeover of ARM Holdings, the chip designer, by Japan's Softbank in the summer of 2016.

Currently, ministers can stop takeovers only if the transaction is worth more than £70m, there are competition concerns and are limited to large transactions and certain industries such as defence, but with the new powers granted after a 10-week consultation it will allow them to intervene in any agreement worth over £1m.

Technology firms, including cybersecurity businesses linked to the Ministry of Defence, or viewed as crucial to the development of the UK’s financial and commercial defence systems will be top on the list of potential risky transactions.

Under the new rules, buyers and sellers will not be obligated to notify civil servants of a purchase but are encouraged to notify the transactions since they could face five years in prison if they are found guilty of infringing the new regulations.

Ministers still want to keep Britain open to foreign investment despite the new rules but the sale of 50% of an asset or 25% of shares in a business will be enough to trigger a review.

The Department for Business, Energy & Industrial Strategy (BEIS) expects 200 cases a year under the new rules to be considered.

Richard Harrington, a Minister in the Department for Business, Energy and Industrial Strategy (BEIS), said last month:

"These new rules ensure mergers and takeovers in key areas of the economy cannot risk our national security, while maintaining the openness to trade and investment that is underpinned by our modern industrial strategy.