National Security and the Labour Government

We could be seeing the beginning of a trend towards greater use of economic commitments, with the Government potentially being more willing to extract concessions from foreign investors as a price for investing in UK businesses.

By requiring foreign investors to make substantial economic commitments, potentially involving job guarantees, continued investment in local infrastructure, or participation in national economic projects, this could serve to balance national security needs with economic growth imperatives, fostering an environment where foreign investment bolsters rather than compromises the national interest.

Indeed, we got a first glimpse of this in EP Group’s takeover of International Distribution Services (IDS), the parent company of Royal Mail, where EP Group gave a comprehensive set of institutional, financial, and regulatory undertakings to the Government. Whilst these undertakings were technically separate to the NSIA Order that was also imposed by the Government (and which require EP Group to ensure Royal Mail remains able to fulfil its services in support of national security), it is notable that many of these undertakings are not purely regulatory in nature and are clearly aimed, at least in part, at protecting wider UK economic interests.

The requirement that each of IDS and Royal Mail maintain their headquarters in the UK and remain UK resident for tax purposes will help to guarantee UK jobs and the continued flow of tax receipts to HMRC. Even more blatant is the undertaking to re-list on the London Stock Exchange (if Royal Mail were to decide to re-list), which appears little more than a rather naked attempt to boost UK stock market activity.

To the extent the Government were to continue in this vein in the context of NSIA reviews, this would dovetail neatly with Labour’s securonomics agenda and help to ensure that acquisitions of domestic businesses maximise inbound investment into the UK. The Government will however be conscious of ensuring that this approach does not go too far and risk cooling foreign investment more generally.