The hand of politics on business

4 Jan 2022

The New Year heralds the Business Secretary’s unprecedented new powers over corporate deal-making. Here, we rate the political risks of deal-making under the new regime.

New Year heralds Business Secretary’s unprecedented new powers over corporate deal-making

Our newly released analysis rates political risks of deal-making

Far-reaching new powers to block or amend corporate deal-making are handed to Business Secretary Kwasi Kwarteng and his successors from today, in a move which, according to a large majority, will make it harder to attract foreign capital to the UK.

The National Security and Investment Act 2021 enters into force on 4 January 2022, subjecting investment in designated sectors in the UK to direct political oversight.

It will give the Business Secretary and his officials a say over changes of control in British companies across 17 key sectors under a mandatory regime. The minister has the additional power to review any qualifying transaction in any sector if he is concerned an investment may raise national security concerns.

Writing in a new political risk analysis of the Act*, published today, Head of Competition and Regulation Jon McLeod said:

“While the Government maintains the UK remains open for business, it is clear that doing deals with a significant UK-angle is no longer going to be the same going forward. And the Act does not only cover foreign acquirers. British acquirers will also be subject to it.”

“The Secretary of State has discretion to block transactions or to subject them to remedies if they may harm the UK’s ‘national security’. There is no appeal on the merits, so getting it right from the first time is key.”

Jon McLeod, Partner, DRD Partnership

“But what is national security? And how will the Secretary of State exercise its discretion? These are questions we explore in the political risk analysis we publish today.”

Our research & expert analysis

Back in September 2021, DRD interviewed 100 City dealmakers to gauge their views about the Act. That study revealed pronounced scepticism, with 70% of respondents agreeing that the Act will make it harder to do deals in the UK, while 73% were convinced it will make it harder to attract foreign capital.

“Some deals are clearly going to pose risks for the UK’s national security. Think of a Russian state-owned company acquiring a key supplier to the UK military. But most deals will not be so clear-cut.”

We argue that serious consideration must therefore be given to what matters in Whitehall and Westminster and any deal should be framed as contributing to those overarching Government objectives.

“This will help to convince the Secretary of State that the deal will not negatively affect the UK’s national security. At the same time, it is important to be aware that third parties may use the Act to disrupt competitor transactions, raising concerns in Whitehall and in Parliament in a way that may cause deals to get snarled up in political bureaucracy. Deal makers who are concerned about antagonists should be ready to engage on the politics of a deal even more than before”, Jon McLeod added.

Click here to access *The Hand of Politics on Business: Political Risk Analysis of the National Security and Investment Act by DRD Partnership.

About our Competition & Anti-Trust Practice

Communications make a difference in competition and anti-trust matters. We work where political, media, litigation and regulatory issues intersect, helping clients to navigate difficult, sensitive and changing terrain.

DRD Partnership is a strategic communications consultancy focused on building value for clients and protecting their reputations at moments of challenge and change. Founded in 2012, DRD Partnership has made a rapid impact in applying proven expertise in managing reputational issues for client businesses and organisations across a wide range of domestic and international markets.

Our approach combines the experience of our senior partner team with rigorous analysis and interrogation of issues. This is to ensure that our programmes deliver meaningful impact.

Our team members have deep experience in the competition law field as lawyers, policy specialists and public affairs practitioners over many years. They have hands-on experience in dealing with complex merger applications, contentious litigation, market studies and cartel investigations, and have acted both for companies subject to regulatory scrutiny and for regulators themselves.

If you would like to speak to Jon McLeod, Competition Partner at DRD Partnership, or submit further questions, please contact: