NSIA 2024/2025 Annual Report is released

The Cabinet Office recently released its Annual Report on the National Security and Investment Act 2021 (the “NSIA”), which covers the period from 1 April 2024 to 31 March 2025. This is the fourth such report that has been published since the NSIA came into force in January 2022.

The Report contains key statistics on notifications made to the Investment Security Unit (“ISU”) during the reporting period.

Mandatory notifications are typically required when a business that carries out activities in one or more of 17 ‘sensitive sectors’ of the UK economy is acquired. 

Even if there is no requirement to submit a notification, the Cabinet Office may ‘call-in’ a transaction for further investigation where it considers that the transaction may present a risk to the UK’s national security interests. On this basis, voluntary notifications are sometimes submitted to protect against the risk of a call-in.

We summarise some of the key facts and figures from the 2024/25 report below.

More notifications, but broadly no further action taken:

• During the reporting period, the ISU received 1,143 notifications, up from 906 in the previous period (2023/24). 
   
• Of the 1,079 notifications reviewed, 4.5% (49) were called in and 95.5% (1,030) were notified that there would be no further action. This is broadly in line with the previous period where 4.4% (37) were called in and 95.6% (810) were notified that there would be no further action. 

Defence continues to dominate:

• The largest proportion of all accepted or rejected notifications related to the defence area of the economy (56% of notifications, up from 48% in the previous period), followed by critical suppliers to government (21%) and military and dual-use (19%). This is perhaps unsurprising, given the breadth of the definition of ‘defence’ under the NSIA.
   
• Of the 56 acquisitions called in, the largest proportion (36%) was associated with the defence sector (up from 34% in the previous period), followed by military and dual-Use (29%) and advanced materials (27%). 

Retrospective notifications continue to rise:

• During the reporting period, 55 retrospective validation applications were received, compared to 33 in 2023/24 and 15 in 2022/23. 
   
• Whilst no final orders were issued following a retrospective validation application, this period sees the first call-in notice issued in relation to a retrospective validation notification.

Mostly UK and US acquirers, and fewer call-ins for acquirers associated with China:

• 65% of accepted notifications involved acquirers associated with the United Kingdom and 29% with the USA. Acquirers associated with France and Luxembourg each accounted for 6% of notifications. This is broadly in line with the previous period. 
   
• The United Kingdom also had the largest proportion of called in acquisitions (48%), followed by China (32%). This is a notable contrast to the previous period where acquirers associated with China had the largest proportion of called-in acquisitions (41%).

Timescales are ever-increasing:

On average it took:

• 7 calendar working days to accept a mandatory notification, and 20 calendar working days to reject a mandatory notification, giving written reasons behind a decision. In the previous period it took an average of 6 calendar working days to accept a mandatory notification and 13 calendar working days to reject a mandatory notification. 
   
• 8 calendar working days to accept a voluntary notification and 16 calendar working days to reject a voluntary notification. This is broadly in line with the previous period but continues to be longer than 2022/23 where it took an average of 4 calendar working days to accept a voluntary notification and 7 calendar working days to reject a voluntary notification. 

No penalties were issued and no financial assistance was given within the reporting period: 

• There were no penalties issued, nor any criminal prosecutions concluded during this period. 
   
• Where offences were identified but a decision was made not to impose a penalty, affected parties were asked to provide reassurance to the Government that steps had been taken to prevent recurrences of these offences. 

This year’s Annual Report reinforces the importance of ensuring that all acquirers carefully consider whether the Act applies to the transactions they are carrying out at an early stage, particularly given the increased number of retrospective validation applications being made and the ISU’s increased time frames for accepting and rejecting notifications.

If you would like to discuss how the Act may apply to your transactions, please contact our specialist team.

Written by Evelyn Quinn