Ministers set to usher in laws to protect firms from foreign predators

Ministers set to usher in new laws to protect vital UK firms from foreign predators after China tech row – as business secretary Alok Sharma declares Britain open for investment but not exploitation

  • Business Secretary to get extra powers to impose conditions on firm takeovers
  • Alok Sharma says Britain ‘must not be blind to the risks hostile actors could pose’
  • Laws will expand to include companies deemed important to national security
  • Here’s how to help people impacted by Covid-19

Laws to protect struggling British firms from takeovers by foreign companies are to be introduced by Ministers following a series of political rows over the expansionist ambitions of Chinese business.

The legislation will give Business Secretary Alok Sharma extra powers to impose conditions on deals to protect key UK firms that have been left vulnerable by the Covid-19 economic crash.

The move is initially designed to protect businesses which are on the front line in the battle against the virus, but will be expanded to protect all companies deemed important to national security.

The legislation will give Business Secretary Alok Sharma extra powers to impose conditions on deals to protect key UK firms that have been left vulnerable by the Covid-19 economic crash

It follows an outcry over an attempted coup by a China-backed company at Imagination Technologies – a UK firm that designs graphic chips for Apple – with Tory MPs protesting that if it had succeeded, it would have effectively handed a strategically important business into the hands of Beijing.

Writing in today’s Mail on Sunday, Mr Sharma says that ‘we must not be blind to the risks hostile actors could pose’, adding: ‘The UK is open for investment, but not for exploitation. I am changing the law to protect those important businesses from being taken over by opportunistic investors.

‘I am expanding the Government’s powers to intervene in mergers and acquisitions… some potential takeovers or mergers in these areas currently fall outside of the Government’s powers for intervention, because the companies are often new, and relatively small. This is not acceptable.

It follows an outcry over an attempted coup by a China-backed company at Imagination Technologies – a UK firm that designs graphic chips for Apple – with Tory MPs protesting that if it had succeeded, it would have effectively handed a strategically important business into the hands of Beijing

‘That is why I am introducing a new law to lower the threshold for intervention on turnover and share of supply for these three areas, to give the Government the oversight it needs. These measures will address national security risks in the short-term, before I set out further plans in the forthcoming National Security and Investment Bill. This Bill will ensure parties cannot avoid the scrutiny of the law by acquiring an asset that could have national security implications.’

Currently, the Business Secretary can intervene only if the targeted business has a UK turnover of more than £1 million. That figure was cut in 2018 from £70 million. 

Chancellor Rishi Sunak is drawing up a package of measures to boost the economy. 

Among the options are a cut to VAT, changes to National Insurance and tax perks for developers to encourage a house-building boom. The Treasury has also been urged to cut stamp duty to incentivise people to buy a home.

Business lobby groups believe cutting National Insurance would help employers keep staff in work as the Government’s furlough scheme is withdrawn later this year. 

Last weekend, business tycoon Richard Caring – who owns a string of restaurants including the Ivy chain and Scott’s in London as well as the famous Annabel’s private members’ club – warned in The Mail on Sunday that two million employees could be made redundant across the sector in a ‘volcano’ of job losses

It is thought any intervention could be reversed when companies have recovered.

The Treasury is understood to be particularly concerned about workers in the hospitality sector, where businesses face a challenge to reopen under social distancing.

Last weekend, business tycoon Richard Caring – who owns a string of restaurants including the Ivy chain and Scott’s in London as well as the famous Annabel’s private members’ club – warned in The Mail on Sunday that two million employees could be made redundant across the sector in a ‘volcano’ of job losses.

The Chancellor is also expected to kickstart ‘shovel-ready’ projects – such as HS2 and pothole repairs – that could give an instant boost to employment and activity.

Lobby groups including the Institute of Directors (IoD), CBI and Federation of Small Businesses want the Government to speed up the rollout of superfast broadband, which is seen as a key area for investment with many businesses now operating remotely.

The IoD has also asked the Government to introduce incentives for companies looking to invest in growing their businesses.

The Treasury has also been urged to change planning restrictions so that empty high-street stores can be more easily converted into residential homes.

Business Secretary ALOK SHARMA says Britain is open for investment, not exploitation as he announces new laws to protect UK companies from ‘opportunistic’ foreign takeovers 

Throughout this crisis, I have been struck by the fortitude shown by the brilliant British businesses at the heart of our Covid-19 response.

They have shown great agility by switching their manufacturing lines to make PPE, and our pharmaceutical industry is making good progress in finding a vaccine and tests for the virus.

They have stood by this country during our time of greatest need, and, as Business Secretary, I am determined to do everything I can to repay their dedication and protect them from possible risks.

In my role as Business Secretary, I can also act on any takeover risks by imposing conditions on a deal to better protect the UK, writes Alok Sharma, pictured above

Overseas investment has the potential to provide a much-needed boost to companies right across Britain. But we must not be blind to the risks hostile actors could pose to businesses that are on the front line in our battle against the virus.

Key firms such as those involved in keeping the food supply chain going and PPE manufacturers are not immune to the economic disruption caused by Covid-19 and could be an attractive prospect for investors looking to capitalise on firms’ temporary financial vulnerability.

And it is absolutely essential that now and in the future, we maintain our capacity to respond to public health emergencies such as Covid-19.

The Government wants to ensure these kinds of critical businesses, which may have become more susceptible to takeovers – either from hostile approaches or through owners feeling they have little choice but to sell to foreign investors because of short-term financial distress – have the necessary protections in place.

I am changing the law to protect those important businesses from being taken over by opportunistic investors. I am expanding the Government’s powers to intervene in mergers and acquisitions.

The change will mean that if an investor targets a firm critical to fighting Covid-19 or a future pandemic, I will be able to intervene. A London factory is pictured above making NHS gowns

The law already allows interventions if the transaction raises concerns in the UK about media plurality, financial stability and national security. This will be expanded to encompass the need to maintain the capability to combat, and mitigate the effects of, public health emergencies.

The change will mean that if an investor targets a firm critical to fighting Covid-19 or a future pandemic, I will be able to intervene.

In my role as Business Secretary, I can also act on any takeover risks by imposing conditions on a deal to better protect the UK.

This legislation is not anti-investment, but a sensible and proportionate response to the heightened risks posed by the pandemic.

It is about ensuring the Government has the necessary powers to safeguard the welfare of British businesses and people in these unprecedented circumstances.

The UK is not alone in making these changes. Germany, the Netherlands and Australia have recognised the likelihood of raids in the wake of the pandemic, and responded accordingly.

Of course, we want to remain open to inward investment. Indeed, the UK is the top destination in Europe for foreign investment – and third in the world. International investment created about 58,000 new jobs in the UK in 2018-19.

But, at the same time, we must preserve our precious national resilience and make sure the rules in place for scrutinising mergers and acquisitions allows us to be the best place in the world to do business.

Some of our pioneering and innovating new industries also need our support. In recent years, the UK has made big leaps in three emerging areas critical to our national security: artificial intelligence, cryptographic authentication technology and advanced materials.

This legislation is not anti-investment, but a sensible and proportionate response to the heightened risks posed by the pandemic. Shoppers are pictured lining up outside retail businesses in Bournemouth this week

Some potential takeovers or mergers in these areas currently fall outside of the Government’s powers for intervention, because the companies are often new, and relatively small. This is not acceptable. 

That is why I am introducing a new law to lower the threshold for intervention on turnover and share of supply for these three areas, to give Government the oversight it needs.

These measures will address national security risks in the short-term, before I set out further plans in the forthcoming National Security and Investment Bill.

This Bill will ensure parties cannot avoid the scrutiny of the law by acquiring an asset that could have national security implications, such as intellectual property, rather than the business itself.

Covid-19 has shaken this country, but our foundations are strong. We must not allow them to be weakened at this critical juncture. My message is clear: the UK is open for investment, but not for exploitation.

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