UK government sets out plans to update investment screening rules

The UK government has published its response to a public consultation on updating the rules governing mandatory investment screening under the National Security and Investment Act (NSIA) 2021. The response, published in March, signals the most significant overhaul of the regime since the NSIA came into force in January 2022. Last year, the government consulted on proposed changes to the NSIA's scope and, in July 2025, committed separately to excluding specific intragroup reorganisations and insolvency appointments from the NSIA regime.

Consultation's reach

The NSIA provides the UK government with oversight and powers to intervene in qualifying acquisitions, investments and commercial arrangements on national security grounds. Under the regime, certain acquisitions in 17 sensitive sectors trigger mandatory notification to the government's Investment Screening Unit which must give pre-clearance to a proposed transaction. The regulations setting out the considerations which bring an acquisition within the 17 sectors of the mandatory notification regime have been in place since January 2022 and have not been updated since.

Following a call for evidence, the government published a statutory report in December 2024 concluding that the regulations were broadly working well but identifying room for improvement. A 12-week consultation ran from 22 July to 14 October 2025.

The consultation proposed: creating standalone schedules for semiconductors and critical minerals, which have been carved out from advanced materials, and merging computing hardware into the new semiconductors schedule; updating eight existing schedules covering areas from artificial intelligence (AI) and communications to energy and synthetic biology; and creating an entirely new water schedule.

Government decisions

The government's published response sets out its final intentions.

On critical minerals, the government intends to carve out definitions from the existing advanced materials schedule into a standalone schedule. Key definitions, including "enabler", will be narrowed to exclude low-risk activities, but all 34 minerals will remain in scope on account of their defence and dual-use significance.

On semiconductors, a standalone schedule will similarly be carved out from the existing advanced materials schedule. Drafting clarifications will be made, particularly around the definition of "packaging", but the schedule's broad scope will be maintained given the foundational role of semiconductors in other critical technologies.

On water, the government confirms its intention to bring the sector into scope. New appointments and variations (NAVs), which are providers to customers in an area that was previously supplied by the incumbent monopoly provider, will be included but subject to a minimum size threshold, capturing only larger NAVs.

On AI, the regulations will be revised to exclude the use of non-consumer AI systems for routine business activities, the use of licensed third-party AI systems, and certain routine modifications and testing. The relevant condition will be refocused so that only entities that create or modify AI systems are in scope. End-users of AI will generally not need to notify.

On communications, the schedule will be amended to avoid capturing low-risk small and medium-sized enterprises, limiting repair and maintenance companies to operators of cable repair vessels for subsea cables and providers of fibre optic cable repair within cable landing stations where network access is required.

On data infrastructure, the government has declined to introduce materiality thresholds, concluding that they risk excluding small but mission-critical data centres. It will, however, make a technical amendment to the definition of a data centre to ensure all relevant activities are covered separately.

On energy, a cumulative capacity threshold will be added starting at 500 megawatts (MW) and at every 500MW increment beyond that level. The government will address drafting inconsistencies and clarify definitions.

Minor changes are also proposed for the critical suppliers to government, suppliers to the emergency services and synthetic biology schedules.

Alongside the formal changes, the government has committed to addressing interpretative concerns across several sectors via guidance. Implementation will require new regulations, accompanied by an updated impact assessment, to be laid before Parliament later this year.

Osborne Clarke comment

The stated aim of streamlining the regime, both in terms of mandatory notification volumes and decision timelines, is welcome. However, it is not certain how successful these proposals will be at achieving those goals.

Although not addressed in this consultation, the absence of targeted exemptions for certain internal reorganisations and insolvency proceedings continues to disappoint the corporate dealmaking community. The government has committed to removing the notification requirement for these transactions "in due course" but has not yet proposed legislation to do so. We hope this will be published alongside the new and amended regulations needed to give effect to the consultation outcome.

Nor are these changes likely to materially reduce the number of mandatory NSIA filings, as the government acknowledged when announcing the consultation. The changes could in fact lead to a modest increase in total notifiable deals.

The government reiterates that most deals are cleared within 30 working days and has committed to keeping the regulations relevant in a fast-changing landscape. However, the 30-working-day period runs from the date of acceptance of a notification. Acceptance itself can take up to 14 working days, a significant rise from the government's stated aim of five working days. Indeed, the average time from receipt to acceptance of a mandatory notification in the period from 1 April 2024 to 31 March 2025 was seven working days.

Early engagement with the NSIA regime remains critical if deal timetables are to be kept on track.