Labour: Tories must “back British business” with foreign acquisitions law

Labour has demanded that the government “back British businesses and protect our country’s best interests” by setting out clear rules and scenarios determining when powers to block foreign acquisitions should be used.

The party, which is supporting government legislation to protect UK companies from hostile actors, has called for ‘national security’ to be legally defined rather than leaving it at the “discretion of the Business Secretary of the day”.

Labour has tabled an amendment to the national security and investment bill putting forward its own definition, which it says would better “reflect modern threats”. This would allow the UK government to block takeovers when they would:

• Risk the transferral of sensitive data;
• Enable hostile actors to gain control of a crucial supply chain;
• Impact UK defence capabilities;
• Impact the UK’s international obligations, including in relation to climate change and human rights; or
• Facilitate activities such as terrorism, espionage, and organised crime.

Labour’s Chi Onwurah slammed the Conservatives’ “poor record on national security” and highlighted the recent controversy over Huawei’s role in the UK’s 5G network, which she accused the government of “waving through”.

ARM holdings, one of the UK’s most successful tech companies, was sold to US company Nvidia for £31bn earlier this year. Earlier this month, Labour warned that the “key national asset” could now be shifted overseas resulting in job losses.

The shadow business minister added: “Their history of making dodgy deals with mates also means it would be wrong to leave deciding what is and is not a threat to national security to the whim of ministers.

“Labour is calling for clear rules that would set out when foreign acquisitions should be blocked, to back British businesses and protect our country’s best interests.”

The 2002 Enterprise Act allows the government to intervene in acquisitions on competition grounds, or on four other bases – financial stability, media plurality, national security or pandemic resilience – if the deal is sufficiently big.

Labour has highlighted powers available to other governments. The French government can block takeovers deemed strategic and the US committee on foreign investment can block acquisitions that have implications for national interests.

Labour frontbencher Stephen Kinnock said: “For ten years, successive Conservative governments have been profoundly naïve and complacent about our national security and our strategic national assets, leaving our home-grown businesses at the mercy of hostile takeovers.

The shadow minister for Asia and the Pacific added: “While this bill is a step in the right direction, it fails to recognise that national security is intrinsically linked to economic security.

“This failure leaves the UK’s critical national infrastructure and supply chains open to threats, particularly from enterprises and investment vehicles that are backed by foreign authoritarian states who often seek to undermine the UK’s defences.

“Labour’s amendments seek to fix these flaws, by defending our country’s sovereign capability and delivering a more resilient and secure Britain.”

The national security and investment bill passed its second reading earlier this month. The legislation is currently being considered by a public bill committee and is expected to next come before MPs at report stage on December 15th.

Below is the full text of Labour’s proposed amendment to the bill.

To move the following clause –

When assessing a risk to national security, the Secretary of State may have regard to factors including, but not restricted to:

1. Whether the trigger event risks enabling a hostile actor to gain control of a crucial supply chain, obtain access to sensitive sites, corrupt processes or systems, conduct espionage, exert inappropriate leverage or engage in any other action which may undermine national security;
2. Whether the trigger event adversely impacts the UK’s capability and capacity to maintain economic security;
3. The potential impact of the trigger event on the UK’s defence capabilities and interests;
4. The potential impact of the trigger event on the transfer of sensitive data, technology or know-how outside of the UK;
5. The characteristics of the acquirer, including its jurisdiction of incorporation and proximity to any state;
6. The potential impact of the trigger event on the security of the UK’s critical national infrastructure;
7. Whether the acquirer in respect of a trigger event has a history of compliance with UK and other applicable law;
8. The potential impact of the trigger event on the UK’s international interests and obligations, including with respect to the protection of human rights and climate risk; and
9. The potential of the trigger event to involve or facilitate illicit activities, including terrorism, organised crime and money laundering.