Committees

UK Sovereignty must not be for sale

14 July 2021

The Foreign Affairs Committee today publishes its Report Sovereignty for sale: the FCDO's role in protecting strategic British assets.

The report concludes that while the UK is - and should remain - an open, stable and attractive environment for foreign investors, as well as highlighting foreign investment as an essential contributor to the UK economy, acquisitions by foreign entities can serve as the first step towards moving strategically vital companies, assets and intellectual property abroad.

This transfer of assets threatens to make the UK reliant on others for assets and services that are critical to our capacity for independent action and global influence, as well as undermining our economy and national security.

The FCDO has a vital role to play in informing the Government’s understanding of the national security risks that can arise from foreign investment. For the FCDO to add value to the new screening regime, the Department must ensure that it has the necessary skills, expertise and structures to support these activities.

The Committee recommends that the Government should not only screen foreign investment at the point of transactions, but also conduct continuous monitoring to identify incremental changes to board compositions and other developments that may increase the influence of foreign entities within an organisation and intervene in these cases where necessary.

The Report concluded that the Government should cooperate on foreign investment screening with other countries with whom we share values and strategic objectives and should take a leadership role in bringing these countries together.

Newport Wafer Fab takeover

The takeover of Newport Wafer Fab by Nexperia, a company heavily backed by the Chinese Communist Party, represents the sale of one of the UK’s prized assets to a strategic competitor, at a time when global chip shortages means that the products manufactured by NWF are of vital national importance.

Failure to conduct a detailed assessment of this transaction under the National Security and Investment Act would indicate that the Government continues to hold an unrealistically optimistic understanding of the Chinese government’s intentions and is prioritising short-term commercial interests over the long-term security of our country. The case of NWF may yet serve to demonstrate that, despite the stated intentions of the NSI Bill, the Government has not yet learned the lessons of previous years.

Chair of the Foreign Affairs Select Committee, Tom Tugendhat MP, said:

“Many invest in the UK because of our stability and openness. We all welcome that international support for our innovation and ideas but we need to be aware that not all partners share our commitment to fair competition. State-backed enterprises are now changing investment decisions from looking for returns based on non-financial metrics.

Our fiercest competitors, notably China, have a track record of using foreign investments to gain access to important technologies and information. 

We’ve witnessed too many of our country’s brilliant tech firms disappear abroad with potentially significant economic and foreign policy implications. This is why I asked the Prime Minister directly about the takeover of Newport Wafer Fab by Nexperia during a Liaison Committee hearing last week.

Although I welcomed his answer, it should not take Prime Ministerial intervention to ensure we don’t lose another of our most innovative companies to China. Our national security strategy and new legal framework should prevent such things from happening. 

We need our Government to be more cautious when it comes to foreign acquisition. The National Security and Investment Act 2021 established a screening process to protect UK businesses from precisely this type of acquisition. Yet we have seen no evidence of this process working in the case of Newport Wafer Fab. Why did the Department for Business, Energy and Industrial Strategy, as the department responsible for screening foreign acquisitions, decline to intervene? Why wasn’t the National Security Advisor involved in the first place? What new information prompted the Prime Minister to refer it to him?

This is why I have written to the Prime Minister to how the process worked in the case of Newport Wafer Fab, and what new information influenced the Prime Minister’s decision to intervene.

We need a Government that is more coordinated and long-term in its approach. Otherwise, many our competitors may start to believe that our sovereignty is up for sale."

Further information

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