National Security and Investment Bill (Fourth sitting)

Stephen Flynn Excerpts

Committee stage & Committee Debate: 4th sitting: House of Commons
Thursday 26th November 2020 Public Bill Committees

[Peter Grant]

Q To be clear, you mentioned in your answer the need to regulate foreign-registered companies from certain types of acquisitions. Does that also apply to UK-registered companies, which are in turn owned by foreign companies? The bad guys will set up a UK company to do all the bad stuff through. Do you agree that we need to follow the chain of ownership and control right back to the ultimate controller?

Creon Butler: Absolutely. We currently have a public register of beneficial ownership for all UK-registered companies. That was a major and important step. There are issues about whether we are doing enough to enforce those legal requirements. That area could be looked at helpfully in this context. When that regime was designed, the view was that market forces, external pressures and gathering information from NGOs and others would ensure that the information on the register was accurate. I am not sure that we can now be sure that is the case. We want to get that transparency for UK-registered companies, and we may need to do more in that direction, particularly through the enforcement process in Companies House.

[Stephen Flynn (Aberdeen South) (SNP)]

Q Thank you, Mr Butler, for your evidence so far. It has been incredibly enlightening. It is probably fair to say that national security—what is tantamount to national security—is an ever-evolving feast, particularly given the technology that is now available. Do you feel that the scope of the Bill, particularly the consultation of the 17 sectors that have been included, satisfies your concerns around national security? I am particularly thinking of social media and the level of data that is pertinent within that. Do you think that is adequately covered by the Bill as it stands?

Creon Butler: I think this comes again to the point about how we will tightly define national security in relation to these broad powers. I think you are thinking of a hostile power investing in a social media platform that can then be used to attack the UK—I guess that is what you have in mind. It is, again, something that I have not thought through. Probably, I would not see the nature of the threat as being so great that we would necessarily make it a mandatory notification, but by using other sources to collect information about threats, we might use the other powers in the Bill—the calling in and those kind of powers, and the voluntary notification —to make sure that we had covered the threat. I do not think I would put it in the mandatory category, but I would want to use other information and powers to collect information, and to call in a particular investment if I felt it was a threat.

[The Chair]

There are no further questions, so thank you, Mr Butler, for your time and your assistance to the Committee. We have our witness for the sixth and final panel in the witness in the room, so we can move on seamlessly and a little early.

Examination of Witness

Will Jackson-Moore gave evidence.

--- Later in debate ---

[The Chair]

Stephen Flynn.

[Stephen Flynn]

Q You caught me making a note there, Sir Graham; apologies. Thank you very much for your evidence so far, Mr Jackson-Moore. It has been incredibly helpful. If I have picked you up correctly, you perhaps inferred that the level of guidance that companies would be seeking in order to provide that assurance is not necessarily there. If that level of guidance is not there, do you feel that that will have an impact on investment ultimately?

Will Jackson-Moore: Yes, it potentially could, because it will create an additional uncertainty. In order to attract capital, you need as much certainty as possible. An ability to say to investors that we do not believe we are in an area of investment that presents a national security threat is important.

[Stephen Flynn]

Q As a follow-up to that, in terms of the fact that the Bill is obviously coming before the consultation has been concluded on the sectors and the consequences therein of being caught within a sector or not, do you think that that timeline will have an impact on investment in the short to medium term?

Will Jackson-Moore: It is already having an effect, in that it is being discussed by organisations that are considering investments into the UK right now. People do not necessarily want to be seen as a guinea pig or have high-profile investments unless they really have to. It is not that it is stopping it; it is just another factor on the balanced scorecard as to whether you are going to make an investment. It is one factor to consider and it is a degree of uncertainty, which is never helpful.

[Andrew Bowie]

Q Earlier on today, and two days ago, we discussed the link between national security and national interest, and I am sure you would agree with me that attracting inward investment is very much in the national interest. We have just heard from the hon. Member for Aberdeen South about the effect that this might be having. We do very well as a country in terms of attracting inward investment; I think we are No. 1 in Europe. As the Bill stands right now, do you think it will have a detrimental effect on our ability to attract inward investment to the UK?

Will Jackson-Moore: Not as the Bill stands in its own right. As you say, we are the largest inbound country for venture capital, for private equity and for infrastructure, and we have been seen as the gold standard for the location in Europe to invest into. Many other European territories have equivalent legislation, but again it is about the application of the legislation, in particular the process, the ability to pre-clear and the timelines actually being met. To understand some of these technologies is not going to be straightforward. These are emerging, cutting-edge technologies in some cases, and the talent required to assess that will not necessarily be easy to attract. Some consideration needs to be given to partnering with research institutes or academia in specific areas, so that there is a panel available to assess certain technologies, not only to understand its position right now but also its trajectory—where that technology may go in the next two or three years.