The Secretary of State for Business, Energy and Industrial Strategy (Alok Sharma)
Today, the Government will lay two separate pieces of secondary legislation to amend the Enterprise Act 2002. The first will allow the Government to intervene in qualifying mergers, including acquisitions, to maintain UK capability to combat and mitigate the impact of public health emergencies.
The second will lower the thresholds for intervention in mergers on public interest grounds for three sensitive sectors of the economy, intended to address any national security risks that may arise related to these sectors.
The Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2020
The Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2020 introduces a new public interest consideration for Government intervention in mergers and acquisitions. This new public interest consideration allows the Government to intervene in mergers involving businesses with a role in combating or mitigating the impacts of public health emergencies, such as the current COVID-19 pandemic.
The economic disruption caused by the pandemic may mean that some businesses with critical capabilities are more susceptible to takeovers—either from outwardly hostile approaches, or financially distressed companies being sold to malicious parties.
These new powers will enable the Government to intervene if a business that is directly involved in a pandemic response, for example, a vaccine research company or personal protective equipment manufacturer, finds itself the target of a takeover.
As this instrument is subject to the made affirmative procedure it has been made today and will come into effect tomorrow.
The draft Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2020
The draft Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2020 will amend the Secretary of State’s powers to scrutinise mergers in three sensitive sectors of the economy on public interest grounds: artificial intelligence, cryptographic authentication technology and advanced materials. These changes are intended to address any national security risks that may arise relating to these sectors. The Government made similar changes in 2018 for three other critical sectors: military/dual-use technologies, computing hardware and quantum technology.
Separately, the Government will lay an accompanying instrument, the Enterprise Act 2002 (Turnover Test) (Amendment) Order 2020, which will be subject to the negative resolution procedure. Together, these two instruments will add the enterprise categories to a list of ‘relevant enterprises’ which are subject to lower intervention thresholds. The turnover test for intervention in these sectors will be lowered to £1 million; and the ‘share of supply’ will be met where an enterprise supplies at least one quarter of all goods of a particular description and there is no longer a requirement for a merger to increase the share of supply.
These orders will therefore allow the Government to intervene on public interest grounds when smaller companies in these critical sectors might be vulnerable as a consequence of a merger or takeover. They will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the UK Government are prepared to act where necessary to protect our national security.
I will also be placing copies of the non-statutory guidance relating to these amendments in the House Libraries.
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