The UK government has introduced legislation to protect businesses that are key to public health from foreign takeovers.
The changes give the government the power to protect companies that could be critical in helping the country in future health emergencies but which may be struggling to weather the coronavirus pandemic.
The new powers cover firms such as pharmaceutical and technology companies.
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“These powers will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the government is prepared to act where necessary to protect our national security,” said Alok Sharma, the secretary of state for business, energy and industrial strategy.
“I am changing the law to protect those important businesses being taken over by opportunistic investors.”
The government already has the power to investigate takeovers for reasons such as national security and on financial grounds, including the ability to block a takeover or seek assurances from a buyer about plans for a business.
The changes to the Enterprise Act 2002 mean the government could take action if a business that is crucial to responding to a pandemic, such as manufacturing personal protective equipment or virus tests, is the target of a takeover by a foreign firm.
The legislation also expands the government’s ability to investigate takeovers involving companies in the technology sector, such as artificial intelligence and encryption.
“Some potential takeovers or mergers in these areas currently fall outside of the government’s powers for intervention, because the companies are often new, and relatively small,” Sharma said.
“I am introducing a new law to lower the threshold for intervention on turnover and share of supply for these areas to give the government the oversight it needs. This bill will ensure parties cannot avoid the scrutiny of the law by acquiring an asset that could have national security implications.”
Currently, the government can intervene only if a business that is the subject of a takeover has a UK turnover of more than £1m.
Last month, Boris Johnson indicated during prime minister’s questions that new measures were to be introduced, saying that the UK needed to “protect our technological base”.
He said MPs were “right to be concerned about investment and … about the buying up of UK technology now by countries that may have ulterior motives”.
The government is yet to stop a deal based on national security grounds but it has imposed conditions on buyers.
The legislation brings the UK in step with countries including France, Germany, Italy and Spain, whose governments have more strict control over potential takeovers.
“The UK is open for investment but not for exploitation,” Sharma said, adding that the financial impact of the pandemic “may mean that some businesses are more susceptible to takeovers”.
In April the EU announced plans to help block foreign takeovers of firms struggling because of the economic impact of Covid-19. Potential measures include governments investing, and taking a stake, in “weak” companies.
The European commission called the proposals “measures of last resort” and is consulting member states.
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