UK Government confirms the planned refinement of mandatory sectors under the NSIA

On 12 March 2026, the UK Government published its response to its consultation on a proposed revised scope for entities the acquisition of which is subject to mandatory prior clearance under the National Security and Investment Act (NSIA).

What you need to know

• On 22 July 2025, the UK Government announced plans to update the UK investment security rules under the NSIA. It issued a consultation, which closed on 14 October 2025 (see our July 2025 update).
• The Government has announced its plan to make changes to various mandatory sector definitions, largely in line with those envisaged in its consultation. In particular, this includes plans to: (i) create standalone mandatory sectors for Critical Minerals and Semiconductors; (ii) update other existing definitions, including Advanced Materials, Artificial Intelligence, Communications, Critical Suppliers to Government, Data Infrastructure, Energy, Suppliers to the Emergency Services, and Synthetic Biology; and (iii) create a new Water schedule.
• In addition, the Government will provide updated guidance on the National Security and Investment Act (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (NARs), which contain the mandatory sector definitions.
• These changes have not yet been enacted into law. The consultation response states that the Government intends to bring secondary legislation before Parliament later this year.
• A previous announcement from the Government had indicated that it intended to remove mandatory notification for certain internal reorganisations and the appointment of liquidators. This was not covered in the consultation or the response.

Key proposals

Following 41 responses to the consultation launched in July 2025, the Government has announced its proposed amendments to various mandatory sector definitions. Acquisition of control (typically more than 25% of shares or voting rights) of such entities is subject to mandatory prior clearance under the NSIA (see our Quickguide for further background).

The planned changes are largely in line with those envisaged as part of the consultation, with updated guidance proposed to take into account feedback received. The Government's proposed changes are summarised below.

Creation of standalone mandatory sectors for critical minerals and semiconductors

As envisaged by the consultation:

• Critical Minerals: the Government intends to carve out a new standalone mandatory sector for Critical Minerals (removing these from the scope of the existing advanced materials mandatory sector). The new sector will include all 34 minerals identified as critical by the UK Critical Minerals Intelligence Centre (and the Government will further consider whether additional minerals should be in scope going forward). However, the Government is looking to narrow the definition of "enabler" and limiting which exploration and extraction land rights will be caught, to seek to ensure that low-risk activities do not fall within scope.
• Semiconductors: the Government plans to create a separate mandatory sector for semiconductors (removing semiconductors from the scope of advanced materials), and merging it with the existing computing hardware category. In response to the consultation feedback, the Government plans to clarify how "packaging" is defined, and to make clear that the provision of all designs, materials, parts or products that are qualified or certified are covered. The Government will provide further guidance on what technologies are covered in due course.

Introduction of a new mandatory sector: water

As proposed in the consultation, the Government has confirmed its intention to include water as a notifiable sector, and it states that a draft schedule was shared with water sector stakeholders for comment after the consultation closed. Along with incumbent water and sewerage companies, the consultation response makes clear that the Government intends for New Appointments and Variations (NAVs) to be in scope, but with a minimum size threshold, so that only larger NAVs will be captured. (NAVs are appointed to manage extensions to the existing water networks, for example for new housing developments and business parks.) The Government will provide further accompanying guidance in due course.

Updates to existing definitions

Following the feedback received, the Government has confirmed its approach to various other mandatory sectors. In particular:

• Advanced materials: as noted above, the definition will be narrowed by removing semiconductors and critical minerals. The Government does not intend to make any further changes to the schedule, but has stated that it will provide updated guidance to address some topics raised in the consultation feedback.
• Artificial intelligence (AI): the consultation envisaged reducing the scope of this definition to exclude entities using "off the shelf" consumer AI for internal processes, and to focus on entities developing, improving, or materially changing AI capabilities and those carrying on the testing and evaluation of AI systems in relation to (i) safety or security of AI systems, (ii) disinformation or misinformation, or (iii) the capability of AI systems that could potentially create a risk to the health and safety or security of people. The Government now proposes to revise the schedule to exclude: (i) the use of non-consumer AI systems for routine business activities; (ii) the use of licensed third-party AI systems; and (iii) certain modifications made to AI systems and testing of AI systems as part of routine business deployment activities and IT policies. The Government has also made clear that it intends to only bring into scope entities that create or modify the AI systems themselves, noting that in most cases, this will result in entities that are only involved in end-use of AI systems being excluded.
• Communications: in line with the consultation, the Government intends to limit the definition of associated facilities to providers with a turnover of at least £5 million (except for cable landing stations). The link to the turnover of qualifying networks / services will also be removed, which avoids the need for acquirers to find out the turnover of the target's client to determine whether they are caught by the definition. The consultation had also proposed the removal of turnover thresholds for submarine cable systems and related services. In response to feedback, the Government will amend the schedule to avoid capturing low-risk SMEs. For example, it will only capture those repair and maintenance companies that operate a cable repair vessel for subsea cables, along with some other adjustments to narrow the scope.
• Critical suppliers to government: as per the consultation, the Government intends to update the definition to focus on 24 ministerial departments and five notifiable services. This includes the addition of the delivery of a notifiable service to a relevant ministerial department where the delivery of that notifiable service will or "is likely to" (replacing "could") result in the qualifying entity generating or obtaining access to material to which a security classification of OFFICIAL together with a marking of SENSITIVE has been applied. The Government considers that these changes will increase clarity, rather than expand the scope of activities captured.
• Data infrastructure: as per the consultation, the Government will update the mandatory sector to include all third-party operated data centres and certain cloud and managed service providers, while removing public sector authorities from scope (now covered under critical suppliers to government). The Government considered including a materiality threshold, but believes this may exclude small mission-critical data centres.
• Energy: the Government does not propose to make significant changes to those set out in the consultation. In particular, the definition will include multi-purpose interconnectors; the definition of "aggregators" will be aligned with Ofgem's; and the proposal to lower the cumulative capacity threshold from 1 GW to 500 MW, and to introduce a 500MW incremental threshold will be retained.
• Suppliers to the emergency services: in line with the consultation, the Government intends to bring immediate subcontractors requiring Non-Police Personnel Vetting (NPPV) Level 2 or above into scope. In response to feedback, the Government will aim to clarify key terms and explore the feasibility of defining terms such as subcontracting arrangements more clearly.
• Synthetic biology: the consultation set out the Government's intention to clarify this schedule, particularly regarding exemptions for gene and cell therapies. Despite calls to further clarify / simplify this sector definition, the Government does not propose to make further changes to this schedule. However, the Government will look to refine the synthetic biology guidance to increase clarity and ensure alignment with the updated schedule.

Comment

Implementing these changes will require secondary legislation, which the Government intends to bring to Parliament later this year. As noted above, the Government will also publish updated guidance on the revised sectors. The Statutory Instrument will also be accompanied by the publication of an updated impact assessment, which will draw on evidence from responses to the consultation.

We note that last year, the Government announced its intention to remove the requirement for businesses to make mandatory notifications for (i) certain internal reorganisations, and (ii) the appointment of liquidators, special administrators, and official receivers. There is no update on these points in the Government's response to the NARs consultation.

Want to know more?

• UK national security and investment control regime Quickguide, 29 May 2024, for an overview of the NSIA regime.
• Proposed updates to the UK National Security and Investment Act Regulations, 24 July 2025.
• "Fine-tuning" the National Security and Investment Act, 24 May 2024.
• Key takeaways from the fourth UK NSIA annual report, 19 September 2025.