NSIA Consultation Response

Executive summary

Overall, the UK government's approach seems to be one of “fine tuning” the NARs to ensure precision and clarity.

In terms of clarity, the NARs will become more user-friendly, especially with the breaking-down of the existing Advanced Materials schedule into smaller, more specific, Schedules dealing with critical minerals, and advanced technologies.

In terms of precision, the government proposals will result in a more carefully constructed set of relevant transactions for which notification is mandatory.  Sensible exclusions having been made in areas like use of AI (as opposed to development of AI) and in delimiting relevant government departments for the ‘Critical Suppliers to Government' schedule, while new areas such as water will expressly come under the NARs ambit for the first time.

However, some long-standing market asks remain outstanding. In particular, investors await promised amends to the NSIA itself (rather than the NARs) to exempt certain internal reorganisations (where notifications must be made even where the ultimate beneficial owner does not actually change).

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• Amendments – artificial intelligence (AI): The government will narrow the schedule to exclude routine internal business use of “off the shelf” AI products. Only entities creating or modifying AI systems will be in scope, not end users. This should exclude mandatory notification of businesses which simply make end-use of AI.
• Amendments – communications: The government will narrow the scope of covered “Associated Facilities” by introducing a turnover threshold of at least £5,000,000 (with the exception of cable landing stations, all of which will continue to be covered). Conversely, the government will remove an existing £50,000,000 turnover threshold for notifications related to (i) submarine cable systems and (ii) repair/maintenance services for submarine cable station and landing stations, although wording will be adjusted to ensure low-risk SMEs continue to be excluded.
• Amendments – critical suppliers to government: The schedule will be narrowed in terms of scope of “government” departments covered, to refer to a defined list of 24 “public sector authorities”. However, the schedule will also be widened to focus on both work relating to “SECRET” or “TOP SECRET” documents, and now also work consisting of defined “notifiable services” below SECRET level.
• Amendments – data infrastructure: The government will add third-party operated data centres and certain cloud/managed service providers to the scope of the Data Infrastructure schedule. For clarity, public sector authorities will be removed from scope and will now be covered under the Critical Suppliers to Government schedule. While the government considered introducing a materiality threshold following consultation feedback, it decided against doing so due to the risk that this might exclude small mission-critical data centres.

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