Consultation on the National Security & Investment Act notifications regime – proposal to add the water sector

The National Security and Investment Act 2021 (‘NSIA’) gives the Government powers to intervene in acquisitions of control of entities and assets in, or connected to, the UK economy that may pose a risk to national security.  The energy sector is one of the sectors within the ambit of NSIA, but the water sector is not.

The Government has issued a consultation on amending the regime and is seeking feedback on proposals to create a new schedule covering acquisitions in the water sector that could create national security risks.

The consultation paper states that the UK’s water infrastructure is facing increasing risks to its resilience in a growing threat landscape, and that investment is one route through which malicious actors could threaten critical infrastructure by providing access to sensitive information and assets. 

The addition of water as an NSIA mandatory area for notification would strengthen the Government’s ability to take action on national security grounds and increase its awareness of changes of ownership that could create national security risks.

There are severe consequences for failing to notify, including fines of up to 5% of global turnover (or £10 million, whichever is higher), custodial sentences of up to five years and void transactions with potential divestment orders in respect of completed acquisitions.

The proposals set out in the paper relate to water and/or sewerage undertakers appointed pursuant to section 6 Water Industry Act 1991.  This would exclude notification for changes in ownership of companies operating as a retailer in the non-household retail market.

The paper adds that while it is difficult to predict the volume of future notifications due to changing levels of investment in the sector, the Government estimates that the proposal will lead to an average of 1-5 notifications per year.