On 22 July 2025, the UK Government published the Annual National Security and Investment Report 2024-2025 (the "Report") and announced a consultation proposing key changes to the to the National Security and Investment Act 2021 ("NSI Regime"). The key changes proposed in the consultation are designed to ease the regulatory burdens for investors and acquirers navigating business transactions in the UK, offering greater clarity and transparency while maintaining a strong national security framework.

Under the current NSI Regime, any person wishing to acquire shares or assets (e.g. business property, intellectual property, business machinery, etc.) linked to one of the UK's 17 sensitive sectors must submit a mandatory notification to the UK Secretary of State for clearance. This notification is required even if the acquisition does not directly involve national security concerns but is tied to one of these designated sectors.

Acquisitions may trigger the NSI mandatory notification requirement based on factors such as the nature of the business, its geographical location, or the type of assets being acquired, particularly if the transaction involves one of the UK’s 17 sensitive sectors. The UK Government has broadened its powers to scrutinise acquisitions, regardless of the target's turnover or asset value, if the transaction raises national security concerns or falls within the scope of the NSI regime.

The Report shows a significant increase in the number of mandatory notifications submitted between 1 April 2024 and 31 March 2025, indicating a growing awareness of the NSI Regime among dealmakers and their advisors compared to the previous year. Notably, 95.5% of notifications were cleared, with only 4.5% being called in for further investigation.

What are the implications for intra-group acquisitions under the current NSI Regime?

An important point to note about of the current NSI Regime is the lack of an exemption for intra-group acquisitions. This means that even if the transaction occurs within the same corporate group, a mandatory notification is required if the acquisition falls within one of the 17 sensitive sectors.

For instance, if a company obtains NSI clearance for acquiring a target and later wishes to transfer the asset or shares to another group company as part of a restructuring, the transaction must still be notified to the Secretary of State, and clearance must be obtained before completion.

The Report indicates that, on average, the Secretary of State takes up to 36 working days to process a mandatory notification and communicate whether the transaction has been cleared or called in for further review. This notification may disrupt business operations and intra-group restructuring efforts, particularly where time-sensitive transactions are involved.

Currently, there is no fast track notification process for intra-group transactions under the NSI Regime, which can lead to delays and frustration for dealmakers looking to execute restructuring strategies efficiently.

What exemptions are being considered to streamline the NSI Notification process?

In a welcome development, the UK Government is considering introducing exemptions for purely internal intra-group reorganisations and acquisitions involving the appointment of insolvency practitioners (such as liquidators, special administrators, and official receivers) where a party is suffering material financial distress, from the requirements of a mandatory notification. These changes, currently under consultation, would streamline the notification process for intra-group transactions and reduce unnecessary regulatory burdens on dealmakers.

Although the proposed changes may not have a significant impact on the overall notification volumes submitted to the UK Secretary of State, the proposed reforms would allow the UK Government to focus its scrutiny on transactions that present genuine national security risks, rather than on routine intra-group or insolvency-related transfers.

Despite these proposed changes, there is no indication that the UK Government intends to lessen its scrutiny of the 17 sensitive sectors. In fact, ongoing consultations suggest that the list of sensitive sectors may be expanded to include semiconductors and critical minerals, further enhancing national security protections.

How can businesses prepare for NSI concerns early in the acquisition process?

Given the evolving regulatory landscape, businesses should proactively assess potential NSI concerns early in the acquisition process. Conducting targeted due diligence is essential for buyers to identify any national security implications at the outset, helping to streamline the notification process and avoid delays.

Businesses should be aware that the online NSI portal frequently experiences false positive firewall blocks, which can cause delays or prevent notifications from progressing smoothly. These technical challenges underscore the necessity for businesses to undertake timely and thorough preparation to mitigate potential disruptions.

If there are uncertainties regarding national security concerns, it may be prudent for both the buyer and seller in a transaction to consider submitting a voluntary notification. It is paramount for the parties to adopt a collaborative and proactive approach in the preparation of any NSI notification. This can provide greater certainty and ensure a smoother process overall.

Under the current regime, the Secretary of State has the authority to call in acquisitions for review—even after they have been completed—potentially requiring a buyer to divest its shareholding. The Report indicates that the Secretary of State exercised this power in 7 cases of non-notified acquisitions due to national security concerns. Once an acquisition is called in, there is limited recourse for the buyer to overturn the Secretary of State’s decision, as demonstrated in the recent High Court case R (on the application of FTDI Holding Ltd) v Chancellor of the Duchy of Lancaster [2025] EWHC 1922 (Admin).

What does the future hold for the NSI Regime?

The UK Government appears to be committed to reforming the NSI Regime to better reflect current economic realities and national security priorities. While the proposed changes are intended to ease certain regulatory burdens for dealmakers, the UK Government's focus on the sensitive sectors is expected to remain robust.

Businesses considering acquisitions or restructuring that may raise NSI concerns should work closely with legal and corporate advisors to navigate the notification process effectively and ensure compliance.

Furthermore, addressing technical issues with the NSI portal (such as false positive firewall blocks) will be crucial to improving the efficiency and user experience of the notification process. Any improvements to the NSI portal should focus on improving its accessibility and usability for businesses.