Sovereignty for sale: the FCDO’s role in protecting strategic British assets Contents

Conclusions and recommendations

FCDO’s role in understanding national security risk

1.The takeover of Newport Wafer Fab by Nexperia 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 NSI 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. (Paragraph 21)

2.We recommend that the Government calls in the acquisition of Newport Wafer Fab by Nexperia for review and imposes appropriate mitigating measures, as a matter of urgency. (Paragraph 22)

3.It is vital that there is continuous monitoring of the investment and technology landscapes to catch non-notified transactions, as well as monitoring for changes to board compositions or ownership models, which may not serve the UK’s security interests, after the initial transaction has taken place with Government intervention if necessary. This should be additional to the notification regime established by the NSI Act and will require regular feed-in from multiple departments, including the FCDO, building on the tech ambassador we recommended in our report on the Integrated Review, Brave new Britain (Paragraph 27)

4.Ongoing monitoring of the global technology landscape by the FCDO should inform any future changes, as needed, to (a) the sectors subject to mandatory notification under the National Security and Investment Bill, and (b) the factors to be taken into consideration by the BEIS Secretary of State when assessing transactions, as set out in the Statement of Policy Intent. We recommend that the annual report outlines how this information has been taken into account in the Secretary of State’s decisions. (Paragraph 28)

5.For the FCDO to add value to the NSI regime, it will be important that the Department has the necessary skills, expertise and structures to effectively support the ISU. If the Government continues to behave in the same ways and rely on the same skills base as it has previously, it will continue to see the same results—or worse, given our changing security environment. (Paragraph 29)

6.The FCDO should demonstrate leadership on the foreign relations aspects of foreign investment decisions. Supporting the ISU’s work in this area is a key responsibility of the FCDO. It will be vital that the Department has the right expertise both at overseas Posts and in London to fulfil this responsibility, including through ongoing monitoring of the global investment landscape. We recommend that the Government outlines how it intends to achieve this in its response to this report. (Paragraph 30)

7.We support the Government’s decision to keep the NSI Act agnostic of geography or type of actor, so that investments are judged on a case-by case rather than country-specific basis. The FCDO has a vital role to play in communicating to other parts of government its assessment of the broader strategic intent of foreign governments in their investment decisions, and this information should be a primary consideration when considering specific transactions. The FCDO should be responsible for advising BEIS on these matters and we intend to hold the Department to account for any failure to do so. (Paragraph 37)

Cross-Government cooperation on investment screening

8.We recommend that 10 percent of Investment Security Unit staff should be secondees from FCDO, to ensure that FCDO expertise can be drawn upon on a day-to-day basis. (Paragraph 44)

Cooperation with like-minded partners and allies

9.Given the complex and transnational nature of the global investment landscape, the UK cannot operate alone on this matter. The Government should cooperate on FDI screening with other countries with whom we share values and strategic objectives. We recommend that the FCDO seeks to play a leading role in bringing together countries and partners from overseas and in building alliances to make sure investment vehicles in one country aren’t used as a Trojan horse in others. (Paragraph 54)

Transparency and reporting

10.With cross-Government working comes a need for cross-committee scrutiny. If the Government is to succeed in achieving an “integrated” approach to UK security and foreign policy as set out in the Integrated Review, Government departments must be held to account by all committees with the relevant remit and expertise. In the case of the Investment Security Unit, this would ensure that scrutiny of Government decisions is not only conducted by select committees with a primarily pro-business lens, but would provide a more balanced and nuanced assessment of its decisions. (Paragraph 64)

11.We acknowledge the Secretary of State’s concern about the workload entailed by involvement of multiple committees in scrutinising the ISU but would argue that this should not be a barrier to effective scrutiny. FAC’s important contribution to UK national security and foreign investment was recognised in the Government response to our report in February 2021. Following our scrutiny of the National Security and Investment Bill, it is our intention to monitor its effectiveness. This requires the Government to furnish us with the necessary information. (Paragraph 65)

12.We recommend that the Chairs of the Foreign Affairs Committee, Intelligence and Security Committee and Science and Technology Committees are also provided with private briefings on the activities of the ISU on Privy Council terms, to ensure that Government decisions are scrutinised from all angles relevant to the UK’s interests. These briefings should be held bi-annually as a minimum. (Paragraph 66)

Published: 14 July 2021 Site information    Accessibility statement