NSIA Annual Report – a more confident regime and a less predictable risk

Latest data points to broader national security judgments and greater willingness to test the regime's boundaries, just as a new Prime Minister is about to take office.

A maturing regime entering a new phase

The Cabinet Office’s Investment Security Unit (ISU) published its Annual Report covering National Security and Investment Act (NSIA) operation from 1 April 2025 to 31 March 2026. During this period, the Government received 1,324 notifications and issued 60 call-in notices, representing a stable 4.5% call-in rate for notified acquisitions. Of the 53 called-in acquisitions reaching a final decision during the year, 44 were cleared, nine were subject to a final order, and only one acquisition was prohibited, underlining the Government's continued preference for targeted remedies over blocking transactions.

At first glance, the 2025/26 Annual Report tells a story of continuity. Notification volumes continue to rise (explained in part by wider trends in global M&A volume), call-in rates remain stable at around 4-5%, and only a minority of acquisitions ultimately require remedies or prohibition.

However, both the report and the wider evolution of the NSIA's application suggest a gradual broadening of the Government's conception of national security risk, consistent with a decade-long shift in UK national security policy towards addressing increasingly diverse and cross-societal threats. The prominence of sectors such as Advanced Materials and Data Infrastructure in last year’s final orders, alongside continued scrutiny of acquisitions involving investors from traditionally trusted jurisdictions, suggests that the Government is increasingly taking a broader and more strategic view of national security. This is reinforced by the announcement of the expansion of the NSIA’s Notifiable Acquisition Regulations earlier in the year to include, among other things, the water sector. The focus is no longer limited to conventional defence or geopolitical concerns, but extends to protecting technological advantage, critical capabilities and long-term economic resilience.

National security may be interpreted more strategically

Government is increasingly unlikely to assess transactions only as isolated events. Instead, it will likely look at whether a transaction forms part of a wider pattern of exposure. A single acquisition may appear manageable on its own, but a series of small stakes, asset transfers, technology partnerships, and the gradual accumulation of control across a sector may look different when assessed cumulatively.

This matters because national security concerns are not confined to the acquisition of obvious assets. They increasingly include control over critical inputs and supply chains; access to sensitive data; technological capability and advantage; the resilience of critical infrastructure; and the long-term ability of the UK and its allies to retain sovereign capability and competitive advantage. This requires an increasingly forward-looking assessment of how evolving threats and technological change may reshape national security risk.

The Annual Report demonstrates the point that assessment is not driven simply by the nationality of the investor. UK investors accounted for the largest share of call-ins and final orders. The Government also imposed final orders on two acquisitions of UK quantum technology businesses by US acquirers. This is a regime increasingly focused on the strategic significance of the capability being acquired.

The Government’s May 2024 updated Section 3 Statement on the use of the call-in power - the most important public articulation of how the Government sees investment screening risk - reinforces this. It refers to cumulative acquisitions, supply-chain dependency, sensitive information, intellectual property, know-how, data, technological capability and the risk that an acquisition may create future harm. That language gives ministers significant room to consider strategic exposure, not just immediate transactional risk.

Government may be more willing to push the boundaries of the regime

The ISU has now processed a large number of notifications, ministers have imposed just over fifty final orders, and advisers have developed a clearer sense of the mechanics of engagement. The early litigation under NSIA has also been favourable to Government, with the courts showing considerable deference to ministerial judgments on national security.

That experience matters. The NSIA was never conceived solely as a foreign direct investment screening regime, but as a broader national security intervention tool, illustrated by its application to domestic as well as foreign acquisitions and its unusually broad powers over assets. Screening regimes often become more assertive once officials have built precedent, internal processes and legal confidence. Rather than expanding the scope of the legislation, Government may simply become more willing to exercise the discretion that Parliament has already conferred. The practical consequence is that ministers may become more willing to test harder cases.

Material influence is one obvious area where the inherently subjective assessment of what constitutes sufficient influence to trigger the regime may continue to evolve. A minority investment may not confer outright control, but board rights, vetoes, information access, financing arrangements, or informal relationships can still enable meaningful influence.

Extraterritorial acquisitions are another area to watch. The Act can apply to overseas entities and assets where there is a sufficient UK nexus. In a world of global supply chains, cloud infrastructure, cross-border data flows and distributed R&D, the boundary between domestic and overseas national security risk is increasingly difficult to draw.

Cumulative risk will also become more important. Government may be less willing to assess each transaction in isolation where an acquirer, fund, state-linked entity or group of connected investors is building a position across a sector, technology stack or supply chain. The same logic applies to asset acquisitions, including intellectual property, datasets and land.

A backdrop of political change

Andy Burnham will be appointed as the UK’s new Prime Minister on Monday. A new ministerial team and roster of political advisers will follow.  Burnham’s appointment as Prime Minister is unlikely to produce a fundamental change in the statutory framework or the established operation of the NSIA. However, there will likely be some material changes to the operating context. Crucially, the current decision maker, the broadly pro-enterprise and less interventionist Darren Jones, is relatively unlikely to remain in post.

His successor may be more willing to adopt a more interventionist stance, particularly where deals involve critical infrastructure, strategic capabilities or supply-chain resilience. It’s also a reasonable possibility that a Burnham-led Government is more receptive to concerns raised by trade unions and core supporters on the Party’s left. Although such considerations cannot provide the formal basis for an NSIA intervention, they may influence how ministers interpret issues such as domestic capability, continuity of supply and infrastructure resilience. The existence of an Economic Assessment as part of the NSIA process, disclosed through recent litigation, also demonstrates that ministers receive formal advice on the wider economic implications of transactions alongside the national security assessment.

What does the evolution of NSIA mean for investors and businesses?

Taken together, these trends suggest that the Government's interpretation of what constitutes national security risk and the application of NSIA is becoming broader, more strategic and less predictable. There are four practical implications for clients.

• Greater uncertainty requires earlier risk assessment. Expanding definitions of national security risk, including around strategic advantage, cumulative exposure and emerging sectors, are making outcomes harder to predict. NSIA risk should be assessed at the start of deal planning, not shortly before signing or completion.
• Transaction structure is becoming increasingly important. Control arrangements, investor composition, transaction scope, financing rights, governance protections, and information access can all affect intervention risk. Seemingly small changes to structure may materially change how Government views the transaction.
• Precedent alone is no longer a good predictor. New areas of Government interest can emerge quickly as the economic security environment changes. A transaction that would have looked low risk two years ago may be assessed differently if the sector, technology, data or supply chain has become strategically important.
• Preparation and engagement drive deal certainty. High-quality filings, early mitigation planning and targeted Government engagement are increasingly critical to securing clearance efficiently. The best filings do not simply describe the transaction; they explain the technology, supply chain, governance structure, investor identity and UK security context in a way that helps Government assess risk quickly.

Flint helps clients navigate the intersection of politics, regulation, competition and economic security. We support investors and companies in assessing NSIA risk, preparing evidence, developing mitigation strategies and engaging effectively with Government.