Government intervenes on foreign takeover bids for UK defence firms
Ministers have intervened in a flurry of foreign takeover attempts on British defence firms in the past year over concerns the bids posed a threat to national security, City PM can reveal.
The government unit that scrutinises takeovers “called in” 24 proposed bids from foreign buyers between the first quarter of 2025 and the end of the first quarter of 2026, according to a Freedom of Information Request made to the Cabinet Office.
Of those, ten deals probed by the Investment Security Unit (ISU) targeted the UK’s defence sector. Nine of these were from foreign private equity or investment banks and one fell under the sovereign wealth fund or state-owned vehicle category.
“The UK is a recognised leader of quality in terms of our defence manufacturing capability, and that does make us a very attractive place for people to come and buy,” Robert Gardener, global co-lead geopolitical risk and national security at Hogan Lovells, told City PM.
“Clearly, that needs to involve a national security layer to ensure that we’re not arming our adversaries or giving up control of data to those who would use it against us.”
Defence topped the list of probed foreign private equity acquisitions, followed by critical suppliers to the government, of which there were 8.
Mark Hills, investment control partner at Mayer Brown, told City PM there would likely be a “high degree of overlap” between the two.
He added defence sits in a “crosshairs” where it is “a strategic priority for the UK from an industrial policy perspective… but it’s also an area where there are clear and obvious concerns with foreign ownership over the defence supply chain.”
Overseas buyers size up UK defence as Starmer scrambles to fund sector
The figures follow Sir Keir Starmer attempting to put the UK’s defence sector on firmer footing in one of his final acts as Prime Minister. In the long-awaited defence investment plan, Starmer coughed up just half the amount of funding military officials had been lobbying for with a £15bn package.
“One of the decisions ministers have to make is on the balance between protecting national security and being able to sell some of the strongest sectors we have in the UK overseas,” Gardener said.
The ISU was established ahead of the National Security and Investment Act officially coming into force on January 4, 2022. The figures also revealed a handful of bids from state-owned operations to artificial intelligence and data infrastructure companies faced government scrutiny.
The figures reflect a wider rise in foreign takeovers on the London market over the past year as some of London’s biggest listed companies have fallen into the sights of foreign buyers. Most recently, US giant Prologis agreed to buy FTSE 100 real estate firm Segro for £12.6bn.
“With the UK’s public markets remaining undervalued relative to many other markets, overseas buyers are capitalising to acquire some of the world’s leading defence companies,” Patrick Sarch, head of UK public M&A at White & Case, told City PM.
“The UK has become great at exporting companies with real potential, and it is not surprising for the government to look at some of these deals to ensure critical capabilities and national interests remain protected.”
A Government spokesperson said: “The Government routinely scrutinises acquisitions to ensure they do not pose a risk to the UK. All acquisitions are considered on a case by case basis.
“The National Security and Investment Act enables the UK to continue championing open investment, whilst protecting national security.”