UK to tighten foreign takeover laws for firms vital to national security amid concerns over Chinese investment

The British government is seeking more powers to intervene into takeovers by overseas companies to prevent the “exploitation” of firms involved in battling the coronavirus pandemic and critical tech businesses.

Lawmakers are set to review changes to the Enterprise Act on Monday, according to an announcement on the government’s website. Aimed at “safeguarding” national security, the amendments would allow the government to scrutinize foreign takeover deals by lowering the thresholds that must be met before such scrutiny takes place.

The authorities say that some firms are “more susceptible to takeovers” due to the devastating impact of Covid-19. The move centers around those involved in the pandemic response, such as vaccine research companies or personal protective equipment manufacturers. It also includes other vital sectors – artificial intelligence, cryptographic authentication technology, and advanced materials.

“These measures will strike the right balance between the UK’s national security and resilience while maintaining our world-leading position as an attractive place to invest – the UK is open for investment, but not for exploitation,” Business Secretary Alok Sharma said in a statement.

Since the Enterprise Act was introduced in 2002, the UK government has intervened in mergers and takeovers on 20 occasions, with dozens of cases based on national security. No transaction has ever been blocked on grounds of public interest.

While the announcement does not point the finger at any particular foreign player, the move comes around two months after a ‘boardroom coup’ scandal, when by a Chinese-backed company allegedly attempted to place people on the board of British technology firm Imagination Technologies.

Some considered the development to be a sign that advanced technology is being moved out of the UK. In April when the scandal broke, the chair of the Foreign Affairs Select Committee, Tom Tugendhat, accused China of trying to use the coronavirus crisis to gain control over companies.

In 2017, when Apple turned its back on UK-based Imagination Technologies, depriving it of a key client and thereby crashing its stock, the firm was bought by private equity firm Canyon Bridge, which is said to be backed by the Chinese government. State-owned China Reform Holdings is its largest investor, which reportedly secured funds for the deal. The British government cleared the deal at the time.

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