Britain’s prosperity relies on its open economy. Last year, 76,000 jobs were created as a result of foreign direct investment, as the UK remained Europe’s top FDI destination. But this reputation for openness cannot be taken for granted. Economic nationalism is rising across western democracies. The backlash against unfettered international capitalism continues, fuelling populism on the left and right. And there is Brexit, sometimes cast as a moment of liberation. In reality, it carries the risk of a nation turning inward.
This is the background to the UK government’s white paper on national security and investment. Theresa May has long signalled her desire for deeper scrutiny of foreign takeovers since she came to power two years ago. The prime minister notably questioned Chinese investment in the Hinkley Point nuclear power station on national security grounds. Yet after an unexpected delay, the deal went through. This government faces a delicate balancing act: keeping the UK open to businesses, while addressing security concerns.
Greg Clark, business secretary, has proposed tougher new rules for future takeovers. He has announced that the 2002 Enterprise Act will be beefed up to counter what the government argues are heightened national security risks. Dealmakers will be expected to notify the government if they believe a deal would endanger security. Breaching the government’s recommendations would be a criminal offence.