Overseas businesses seeking to buy specialist British technology firms will face increased scrutiny under new rules drawn up to protect national security.
The government has introduced proposals to parliament that would dramatically strengthen its powers to intervene in takeovers of firms operating in the advanced tech sector.
Under current rules, ministers can only intervene in mergers involving companies with revenues of over £70m a year or when mergers raise competition concerns.
But under the new system, the government could reject takeover bids for firms operating in the sector with revenues of just £1m a year. It also wants to remove a requirement for a merger to lead to an increase in the buyer’s share of supply of goods or services.
A green paper published last year ahead of a consultation on the changes outlined the motives for the revisions, which will apply to businesses developing military technology, computing hardware and quantum technology.
“As technology has evolved, small businesses which undertake niche activities or produce highly specialised products in this sector increasingly hold information or items which carry significant national security risks,” the paper states. “However mergers involving these businesses are not currently subject to scrutiny for national security reasons.”
Business minister Richard Harrington said the rule change, which is subject to parliamentary approval of amending the Enterprise Act, forms the first step in the government’s plans to reform how it scrutinises business transactions.
“Around 75,000 new jobs were created in the UK last year thanks to foreign investment,” he said in a statement. “However, our economy can only thrive if our national security is protected, so it is right that we keep our powers of intervention under review to ensure the rules keep pace with innovation.
“These new measures will allow us to ensure that takeovers in key areas of the economy cannot risk the UK’s national security whilst maintaining our position as one of the most open and modern economies in the world.”
Earlier this week, US President Donald Trump cited national security concerns as he quashed Singaporean chipmaker Broadcom’s proposed takeover of US rival Qualcomm.
His presidential order claims there is “credible evidence” to suggest Broadcom “might take action that threatens to impair the national security” of the US if it owned Qualcomm.
The proposed deal was worth $140bn and would have been the biggest takeover in the history of the tech industry.