The projected legislation comes amid concerns that the unparalleled recession triggered by the COVID-19 pandemic could make state-backed foreign takeovers commonplace as local businesses are currently cash-strapped and in need of financial support.
Boris Johnson is set to table tough laws in parliament in the coming weeks to prevent takeovers of local entities by foreign companies that could potentially threaten national security through disruption, espionage, or by using “inappropriate leverage”, The Times reported citing Tory lawmakers.
The proposed legislation will oblige companies to report all attempted takeovers, with Johnson, who confirmed the initiative in the Commons, telling an unnamed Tory MP that he was “absolutely right” to be concerned about British technology being acquired by countries with “ulterior motives”.
The risky takeovers would comprise purchases of more than 25 percent of companies’ shares, the acquisition of “significant influence”, or the purchase of assets and intellectual property.
Those companies that fail to comply with the new rules could be fined hefty sums in the hundreds of thousands of pounds, and have their directors jailed and disqualified, the report reads.
The prime minister reportedly wants “academic partnerships” and research projects to also be included in the list of companies that fall under the rules amid concerns that the unparalleled coronavirus-induced crunch could make British companies more vulnerable than ever before to state-backed foreign takeovers.
“Clearly a recession is going to have a disproportionate effect and leave companies like ours under a greater threat of takeover from state-backed entities than at any time before”, Tom Tugendhat, a Tory MP and chairman of the foreign affairs select committee said, warning that the UK has “some of the weakest protections against foreign takeovers of any nation”.
“There is a danger that if we do not keep pace then our companies will be naked when everyone else is wearing armour”, he went on arguing that the said security risks could be two-way:
“Some companies subject to takeovers are directly connected to security, while having large chunks of your economy taken over by foreign state-owned enterprises risks putting your economy in the hands of foreign politicians”, Tugendhat explained the threat at length.
The calls came as Huawei bought a stake in a company linked to Oxford University, with Oxford Innovation Sciences saying though that the Chinese telecoms giant does not have “any preferred or special access”. Tory MPs have strongly criticised the ties.
Independently, Imperial College London has inked a £5 million deal with Huawei, including a new “tech hub” on its west London campus. The company will provide 5G and pay for research and facilities over five years. Despite Tories calling the relationship “deeply worrying”, the Imperial College says the support allows for “high-quality and open research”.
Boris Johnson, meanwhile, is reportedly seeking to significantly cut or backtrack on the role he gave Huawei in Britain’s 5G network following backlash by the US and Tory MPs. In response, China’s ambassador to the UK Liu Xiaoming is said to have privately warned that barring Huawei, which was allowed to have limited access to the British market earlier this year, could harm plans for Chinese companies to assist in the construction of nuclear power plants and the HS2 rail network.
The prime minister is understood to have further added fuel to the fire with regard to China as he said in an article in The Times last week that Britain would not walk away from the people of Hong Kong and would have “no choice” but to offer them a fast track to citizenship if China moved to introduce national security legislation in Hong Kong. The Chinese authorities, for their part, have repeatedly urged foreign nations not to meddle in their internal affairs.