Walking a National Security Tightrope

From Putin to the pandemic, endless reasons and crises have been blamed by countries around the world for tightening their grip on their borders and on foreign influence in business and domestic politics. While perhaps a necessary security measure, the new National Security Bill has created fresh concern for investors and businesses due to its broad approach and heavy penalties.

The Bill does not differentiate between hostile and friendly states, treating companies from Canada the same as those from China. The Government appears to be following the approach of other Five Eyes allies, especially the US and Australia but without many of the commercial nuances. For the governing Conservative Party, deterring foreign investment could put a spanner in the works for a post-Brexit ‘Global Britain’ and may be an unwise move with a general election looming in 2024.

Organisations which have come up against the current wave of national security policies have experienced a sclerotic and perilously slow process. British politics is already a bizarre and daunting mountain to climb for those unfamiliar with the peculiar machinations in Westminster and Whitehall. It is little wonder that businesses are being vocal about their concerns.

The recent shift in British foreign relations has many causes. The Coalition Government courted investment from China and embedded it throughout the UK. Relations have seemingly frozen to sub-zero levels between the nations. In the UK we have seen the emergence of legislation such as the retroactive National Security and Investment Act 2021 (NIS Act) which has already drawn widespread criticism for the lack of consistent application by the Government and politicisation of decisions.

The sudden shift in geopolitics is often placed on the leadership and pressure coming from the US. However, the UK separately has seen several high-profile scandals involving donations by a Chinese Communist Party agent to British politicians and the Ukraine invasion exposing the influence of Russian oligarchs, just to name two. The invasion of Ukraine combined with the anti-China hawks in Parliament, and the governing Conservative Party trying to play to its policy strengths, has seen the UK moving increasingly against both real and perceived ‘foreign influence’.

Cleaning up both foreign influence and investment has not just remained fuel to heat Parliament during an energy crisis. Operational pressures on parts of Government tasked with executing the implementation have, in part, been the result of new broad and extremely hawkish legislation such as the NIS Act and the new National Security Bill currently winging its way through Parliament.

While the Home Office ministerial and press teams are extremely mindful of the current criticism from the media and politicians, they are unlikely to change their very dogmatic position. This Bill will likely succeed due to the strong backing of the ‘hawkish’ Conservative politicians who remain an influential part of the governing party.

The Bill has few fans remaining in business with the CBI and City warning that the Foreign Influence Registration Scheme (FIR) could deter investment from UK-allied countries due to the onerous administration, heavy liability for non-compliance, and lack of exemptions or commercial ‘whitelists’. Investors and businesses should not hold their breath for commercial whitelists or exemptions as the COVID-19 PPE procurement scandals keep rumbling on and the opposition Labour Party continues to push back on what they see as an opening for cronyism.

UK politics has felt at times like a chaotic merry-go-round where one crisis inspires another, with a lack of a consistent policy approach and painfully slow processes frustrating businesses and investors. But the geopolitical and national security concerns voiced by politicians are unlikely to go away any time soon.