On 22 July 2025, the Chancellor of the Duchy of Lancaster, Pat McFadden, announced reforms to the UK’s investment scrutiny regime under the National Security and Investment Act 2021 (NSIA). These changes are designed to enhance transparency and reduce unnecessary burdens on businesses whilst maintaining a regime that allows the Government to robustly assess and address national security risks. The positive news is that the Government has decided to take a more pragmatic approach to internal reorganisations and also the appointment of insolvency practitioners.  More broadly, the Government has also now launched a 12-week consultation on its proposals to streamline the scope of activities included in each of the sensitive sectors and to introduce an additional new sector for water.

Background

You may recall that the previous Government had carried out a review of the regime between November 2023 and May 2024, which had been interrupted by the July 2024 General Election. After a period of uncertainty, these latest proposals pick up on feedback from that earlier review and have introduced targeted reforms aimed at streamlining and refining the regime after 3 years of operation.

The headlines

1. The Government has announced the following decisions:

• to exempt all insolvency practitioners from the NSIA regime, so that their appointment will no longer risk triggering a requirement to notify the transaction – previously this exemption was limited to administrators;
• to exempt “certain” internal reorganisations from the notification requirement.

To date, these transactions have been considered to be low risk therefore removing these notification requirements will reduce administrative burdens on businesses and their lenders, and allow the Government to focus on higher-risk cases. While this is very positive news, the devil will be in the detail and we await the exact wording of these exemptions to ascertain likely practical impacts.

2. The Government has proposed changes to the scope of activities caught by the NSIA in each of the sensitive sectors under the Notifiable Acquisition Regulations. These include changes that:

• bring all activities involving semi-conductors and critical minerals into one area;
• create a new area for acquisitions in the water sector; and 
• provide minor updates to existing areas including Artificial Intelligence (AI), Communications, Critical Suppliers to Government, Data Infrastructure and Energy (amongst others).

The most helpful clarifications in terms of reducing regulatory burdens appear to be for AI and Communications – in particular, it is now clear that target companies using ‘off the shelf’ AI tools for internal processes are not caught, and there is also a carve out for certain companies providing associated facilities to telecom operators.