The Institute of Directors has urged the Government to ensure the Department for Business (BEIS) has sufficient resources available to be able to handle a huge increase in workload expected from a new Bill designed to scrutinise foreign takeovers.
The Institute welcomed a Government amendment to the National Security and Investment Bill which increases the stake threshold at which the business secretary Kwasi Kwarteng’s department has to be notified of a bid from 15% to 25%.
The Bill increases the Government’s ability to scrutinise and intervene in business transactions. The IoD expressed fears about the scope of the original legislation, the potential for unnecessary delays and impact of increased bureaucracy.
The new amendment, which mirrors similar restrictions in the United States, follows previous changes announced by the Government which narrowed the list of foreign investments included in its scope.
Dr Roger Barker, Director of Policy at the Institute of Directors, said:
“The IoD raised concerns very early on about the potential impact of the original proposals and it is encouraging to see the Government listening and acting on those concerns.
“Striking the right balance between our national security and avoiding unnecessary delays that could put investment at risk is the right thing to do however we still have some concerns.
“The volume of transactions the Government has to approve will still significantly increase and while this amendment and other measures will help to alleviate that, it remains hugely important that the business department has sufficient resources to handle the increase in workload.
"There’s no doubt that backlogs could delay or even curtail benign business transactions.”
The National Security and Investment Bill, which is currently being scrutinised by the House of Lords, vastly increases the Government’s ability to intervene in business transactions on the grounds of potential threats to national security.
The Government has said that the ‘powers will be exclusively for use on national security grounds’, but has not defined national security for the purposes of the Bill. As a result, the powers could conceivably be used to target transactions on the basis of a broad definition of national security, encompassing issues relating to industrial strategy.
Under the Bill, businesses in a range of sectors will have to make mandatory notifications ahead of ‘trigger events’ that would see the change in levels of control of an entity or asset. In addition, businesses can voluntarily notify Government of such an event if they are outside these sectors but believe the transaction may have implications for national security.
The Business Secretary can ‘call-in’ transactions they deem to have a bearing on national security up to 5 years after the fact. Non-compliance with the regime can lead to 5 years’ imprisonment.
The OECD has estimated that $750bn has flowed into the UK as a result of FDI over the past ten years. In addition, the UK’s reputation as a global centre for business investment contributes to its attraction as a destination for the world’s most entrepreneurial companies and directors.