NSIA 4th Annual Report - key takeaways

On 22 July 2025, the UK Government published its fourth Annual Report ("Report")¹ on the functioning of the UK's investment screening regime established by the National Security and Investment Act 2021 ("NSIA").² The Report covers the period from 1 April 2024 to 31 March 2025. It offers businesses and practitioners a unique glimpse into the current functioning of the UK's investment screening regime, which is notable for its 'black box' nature and limited transparency.

Importantly, the Report was released on the same day that the Government launched its consultation ("Consultation") on forthcoming amendments to the NSIA,³ as part of the Government's plans to cut red tape and increase investment in the UK - see our article on the Consultation here.

Together, the Report and Consultation shed light on the present and future impacts of the NSIA regime on UK investment and are valuable indicators of the interaction between two core elements of Government policy: economic growth and national security. Ultimately, as stated by Pat McFadden MP, Chancellor of the Dutchy of Lancaster with ultimate oversight of the Investment Security Unit (“ISU”) and Cabinet Office - the statistics provided in the Report are a “testament to a system that is working” and that “most businesses will never need to interact with the takeover screening process”. The UK welcomes investment in the key sensitive sectors of the UK’s economy.

The Report – key takeaways

1. Yet again, the total number of NSIA filings has increased

As the table below shows, between 1 April 2024 and 31 March 2025, the Government received ~26% more notifications under the NSIA as compared to the previous reporting period (up from 906 to 1,143 notifications). This marks a substantial increase in the number of notifications per year. Contrastingly, this figure has remained quite static in previous years, with an increase of only ~5% between 1 April 2022 – 31 March 2023 and 1 April 2023 – 31 March 2024.

    
As expected, most notifications are still mandatory filings, albeit the number of voluntary notifications has also increased compared to the previous reporting period – but not to the same extent. The number of retrospective applications (i.e. notifications concerning transactions that completed without prior approval) has however continued to increase substantially year-on-year.

Interestingly, the greater total number of filings may indicate investors' increasing awareness of the NSIA regime, as it becomes a routine consideration within deal-making processes, alongside longstanding and well-known review frameworks such as merger control.

2. Call-ins remain rare, but are we back to normal with final orders?

    
As indicated in the table above, the number of call-in notices has remained proportionately stable during the latest reporting period – 56 deals called-in for in-depth review (up from 41), and outright prohibition decisions continue to be very rare.

This year's Report also shows a much greater willingness on the part of the ISU to issue final orders, with 17 of the 56 total called-in deals resulting in Government intervention (up from 5 in the previous year). This suggests that if a deal is called-in, there is a good chance that it will not escape untouched and some form of remedy will need to be agreed to obtain the necessary regulatory clearance from the ISU.

In any event, this year’s statistics are broadly in line with those of the 2022-2023 reporting period, which had 15 final orders and 5 prohibitions, suggesting that potentially the 2023-2024 reporting period was an anomaly.

3. Review periods… what has changed?

Acceptance and rejections of notifications

Following the submission of a notification to the ISU, the ISU must either accept or reject that notification.

On average, according to the latest reporting period statistics for 2024-2025, it has taken the ISU, seven working days to accept a mandatory notification and eight working days to accept a voluntary notification. It has also taken longer to reject notifications, and indeed, rejections in the latest reporting period were higher than in the previous year – up from 24 to 37. The largest proportion of rejected notifications were voluntary notifications (i.e., 19).

Initial review period

Once a notification is accepted by the ISU, the ISU has 30 working days to carry out its initial review. Approximately 95.5% of transactions reviewed by the Government were cleared without conditions in the initial 30 working day review period. This echoes the Government’s view that the “vast majority of inward investment continues to pose no threat to [the UK’s] national security”.

In-depth review period

Should the ISU fail to complete its review in the initial review period, the ISU has 30 working days to carry out an in-depth review and determine whether the deal gives rise to national security risks, such that remedies are necessary. The ISU can then unilaterally extend this period by up to 45 working days and further extensions can be mutually agreed between the ISU and the parties to the transaction.

On average, it took 29 working days (for both mandatory and voluntary notifications) for the ISU to call-in a transaction – just one day before the end of the initial review period. This was the same as in the reporting period 2023-2024.

In-depth assessments took an additional 24 working days on average (down from 26 working days) where they resulted in clearance, or 70 working days (up from 34 working days) where conditions were imposed.

The ISU also unilaterally extended the review period on 21 occasions in the latest reporting period, up from 12 times last year. Mutually agreed extensions were used on two occasions, down from three in the previous reporting period.

This suggests that the ISU is struggling to carry out reviews during the initial 30 working day review period and complete in-depth reviews within the further 30 working day period. This may be due to the complexity of transactions, the increase in the number of notifications and/or indeed the number of call-ins over the last reporting period. Either way, parties to a deal should build in extra time for NSIA reviews.

4. The Defence key sector continues to dominate notifications, however emerging technologies remain notable

By far the largest proportion of notifications made to the ISU were associated with the Defence sector (56%), followed by Critical Suppliers to Government (21%) and Military and Dual Use (19%). This echoes the previous reporting period, during which 48% of notifications were associated with Defence.

Similarly, Defence accounted for the largest share of call-ins (36%) and 9 of the 17 final orders issued in the latest reporting period. The Military and Dual-Use sector followed closely, representing 29% of call-ins. Therefore, whilst there has been growing scrutiny of notifications relating to emerging technologies with potential national security applications - such as Advanced Materials, Artificial Intelligence and Energy - the data indicates that sectors that are plainly fundamental to the UK’s national security, such as Defence and Military and Dual-Use, remain a prime focus for the ISU.

Interestingly also, of the 134 voluntary notifications reviewed during the latest reporting period, 20 were called-in for an in-depth review and captured sectors of the economy such as manufacturing, academic research and development in higher education.

5. UK investors beware…

 Investments originating from UK acquirers were under scrutiny in this latest reporting period. Of the 56 transactions called-in, the largest proportion involved UK-associated acquirers (48%). Similarly, the largest number of final orders involved UK acquirers and most withdrawals after call-ins involved UK acquirers. This is somewhat unsurprising given that over 60% of notifications related to transactions involving UK acquirers.

Nonetheless, transactions involving Chinese investors continue to face scrutiny, with 32% of called-in deals involving Chinese-associated acquirers this last year, followed by US (20%) and UAE investors. Indeed, several factors could explain the slight decline in the proportion of call-ins involving Chinese-associated acquirers – namely, the increased regulatory scrutiny is having a discouraging impact on Chinese investors, or it could be influenced by broader economic and political considerations.

6. Another year of no sanctions…

When the NSIA was introduced in Parliament, there were significant concerns about the strict penalties associated with failing to make a mandatory filing, or completing a deal subject to a mandatory review, without clearance. Fines of up to 5% of a company's global turnover (or £10 million, whichever is higher) can be imposed or even criminal sanctions made against directors.

However, for yet another year, the Government has not exercised these enforcement powers. This is the case even though 60 offences of completing a notifiable deal without approval were identified by the ISU (up from 34) and the ISU received 55 retrospective validation applications (which were all accepted). Instead of enforcing sanctions, the ISU required the parties to these deals to provide reassurances to the Government that steps would be taken to prevent any future non-compliance.

Nonetheless, investors should not interpret this as evidence that the Government will refrain from taking enforcement action in the future. Indeed, the ISU continues to monitor markets for deals that it considers should have been filed. The most severe sanctions in the ISU's toolkit continue to loom large over the NSIA regime.

Final words

The NSIA regime continues to be one of the most active foreign direct investment screening regimes globally. It is important for parties to transactions with a nexus to the UK to carry out an NSIA risk assessment early on, especially where the target to a transaction may have activities in the UK in one of the 17 high-risk key sectors under the NSIA regime. This is particularly the case, given that the ISU continues to proactively monitor market intelligence and commence reviews into non-notified deals on its own initiative. Investors should therefore not underestimate the risk of failing to make a notification, especially where it is unclear if a deal gives rise to a potential national security risk.

Nor should UK investors consider their deals likely to be treated in a more lenient manner compared to deals involving foreign investors. In this latest reporting period, UK-acquirer associated deals surpassed the number of deals involving Chinese investors that were reviewed by the ISU, albeit the Government is still focused on carefully reviewing deals involving Chinese investors.

Indeed, parties to a transaction clearly need to continue to take the NSIA regime seriously and will need to build more time into their deal timetables for the NSIA review, given the increasing time it is taking the ISU to accept and review notifications.

Finally, given the ongoing Consultation, investors should keep an eye on key changes to the NSIA regime – especially the changes to the sector definitions which might mean more deals fall within the scope of the NSIA.