11th Report - Toward a new doctrine for economic security

Economic security is fundamental to national security. We welcome the Government’s recognition of this. By its very nature however, only industry and Government working jointly and severally together can safeguard the UK’s economic security through the ‘whole of society approach’ to defence which the Prime Minister has said the times now require. New safeguards however will not come without cost. On the contrary, a stronger defence of our economic security will require sustained long-term public and private investment. This in turn will require both clarity and certainty about the Government’s objectives, well beyond the life of one Parliament. (Conclusion, Paragraph 19)

In the face of a fast-changing international environment, a fixed, formal definition of ‘economic security’ is likely to be unworkable. However, as demonstrated by CONTEST, Government can guide policymakers and businesses by clearly setting out the principles of a long-term approach in a new and clearly articulated economic security doctrine. (Conclusion, Paragraph 20)

The Government should adopt, and clearly set out, the strategic principles of a new doctrine for economic security. From our consideration of the evidence and comparisons with other jurisdictions, we recommend that this might best incorporate six core principles - the ‘6Ds’: • Diagnose and regularly share an understanding of threats to the UK’s economic security. • Develop sovereign capabilities in areas critical for UK economic security. • Diversify critical supply chains, energy sources and technology inputs to reduce risks of disruption and coercion, through combined action with allies. 92 • Defend critical and vitally significant infrastructure, other important national assets such as data, intellectual property to prevent technology leakage, and critical sectors through building resilience, especially in cyber space. • Deter threats to UK economic interests through proactive enforcement of offensive economic measures, such as sanctions, at home and abroad. • Dovetail public-private co-operation domestically and internationally, aligning and collaborating with allies, and ensuring a concerted and joined-up effort across the nation and the UK’s alliances. (Recommendation, paragraph 21)

Safeguarding economic security will always involve calculated trade- offs. Principles will often conflict. No government therefore can eliminate all ambiguity for businesses and policymakers. This is where political leadership is crucial. It is for the Government to set out how it has chosen to make trade-offs and to prioritise between different principles in any given situation. In turn, it is for Parliament to scrutinise the choices made by Government, to challenge and ensure democratic legitimacy. (Conclusion, Paragraph 22)

To ensure both clarity and long-term certainty for the UK’s economic security regime, the Government should consider enshrining the key recommendations in this Report via a new Economic Security Bill. This would allow Parliament to be fully engaged in providing a new, stronger foundation to the UK’s economic security. (Recommendation, paragraph 23) Threat assessment

The Government has published a multitude of security reviews and sectoral evaluations, but not a single consolidated assessment of the threats to UK economic security. Given the lack of a “single source of truth”, we have decided to summarise our own baseline assessment of economic security threats. We hope that Parliament will enhance and develop this ‘parliamentary view’ over the years ahead. From our evidence, we have identified ten elements of the threat landscape facing the UK economy: i. Transnational risks; ii. Disruption to worldwide market competition; iii. State threats, including the coercive use of economic tools; iv. Supply chain disruptions, along with threats to transport and sea lanes; 93 v. Critical minerals; vi. Critical National Infrastructure (CNI); vii. Cyber and emerging technology; viii. Illicit finance and money laundering; ix. Foreign investment in critical sectors of the UK economy; and x. People-focussed threats, such as intellectual property (IP) theft or physical threats to executives. (Conclusion, Paragraph 31)

Together these threats point to a transformed threat landscape in which we are likely to see a radical expansion in the private ownership of public risk. This underlines the absolute imperative of rethinking the way state and market work together to safeguard economic security. Most challenging of all is the reality that rarely will any single one of these risks present alone. Instead, they may combine in ways that the UK may struggle to manage. (Conclusion, Paragraph 32)

The UK faces increasingly complex transnational threats. The devastating impacts of the Covid-19 pandemic and the rapidly changing climate are two examples of existential challenges, against which the UK economy must become more resilient. (Conclusion, Paragraph 35)

The UK faces unprecedented disruption to the international economic order. As many powers prioritise self-interest above adherence to the rules-based system, the UK economy faces new risks of economic damage that may jeopardise the UK’s growth objectives. (Conclusion, Paragraph 37)

Threats to the UK from state actors that fall short of military action are continuing to grow. Foreign powers are increasingly willing to coerce or undermine others using economic tools or by exploiting economic interdependencies. Russia, China, Iran and North Korea are most often cited as being directly or indirectly responsible for hostile acts targeting the UK. However, actions taken by the UK’s allies—as part of intensifying political, economic and technological competition globally—also contribute to geopolitical uncertainty and economic instability. (Conclusion, Paragraph 43)

The world has never been more interconnected, and the UK economy is dependent on complex and interwoven supply chains. Consumers, businesses and public institutions rely on supply chains where objects repeatedly cross borders, often on a “just-in-time” basis where the slightest disruption can have enormous impacts. The complexity of supply chains promotes efficiency, low prices and consumer choice, but leaves the UK economy vulnerable. (Conclusion, Paragraph 46) 94

Maritime infrastructure, together with the UK’s telecommunications and energy systems, underpin these supply chains. The events of recent years, notably Houthi attacks on commercial ships in the Red Sea, have demonstrated the continuing centrality of maritime security to the UK economy. Increasing global instability means maritime security is more important than ever. (Conclusion, Paragraph 47)

Over the coming years, emerging technologies and the net zero transition will increase global demand for critical minerals exponentially. The absence of any significant domestic presence in the mineral value chain leaves the UK significantly exposed to disruptions in their supply. There is considerable potential for adversaries to use this to their advantage, while the UK has no equivalent strategic leverage. (Conclusion, Paragraph 50)

The UK’s existing critical national infrastructure is vulnerable to a range of threats, from extreme weather to cyber-attacks. In expanding and renewing that infrastructure in response to a growing population and the net zero transition, the UK may be forced to re-evaluate the trade off between on the one hand, lower cost technology and investment from China, and on the other, the risks to resilience that would entail. (Conclusion, Paragraph 53)

Cyber threats to the UK’s economy, institutions and infrastructure continue to evolve. A string of high-profile attacks in 2025 have vividly demonstrated the devastating impacts of these attacks on workers, consumers and associated supply chains. The boundary between “state” and “non-state” cyber-attackers is becoming increasingly blurred, and the rapid emergence of new technologies will exponentially multiply the damage they can inflict. (Conclusion, Paragraph 56)

The UK’s long-standing status as a global financial centre is both a crucial economic strength, and a potential vulnerability that must not be overlooked. Inadequate safeguards against sanctions evasion and money laundering risk undermining the effectiveness of the UK’s economic security toolkit. (Conclusion, Paragraph 58)

The UK’s reliance on foreign direct investment risks a loss of control over emerging companies in industries critical to the national interest. Capabilities developed by the UK defence and emerging technology sectors are increasingly being targeted by foreign firms and governments. (Conclusion, Paragraph 60)

In increasing the resilience of institutions and technology, the UK must not lose sight of people-based threats. People are an organisation’s greatest asset, but they can also be its most unpredictable vulnerability. The UK’s adversaries can be expected to target individuals for influence, blackmail, 95 espionage and even physical harm. As more sectors of the economy are recognised for their importance to economic security, so must the UK’s appreciation of the scale of this threat grow. (Conclusion, Paragraph 62)

The ten key threats we outline above will rarely, if ever, present in isolation. Hostile actors are expected to target the UK economy along multiple vectors simultaneously. This poses particular challenges for an economy characterised by the private ownership of public risk, where the Government often lacks the tools to intervene rapidly across multiple sectors in response to a complex threat. (Conclusion, Paragraph 69)

We have heard through this inquiry that there is currently no shared space for industry and Government to simulate their response to combined attacks across multiple sectors, or to plan public and private investments that improve long-term resilience. This is dangerous. The National Exercising Programme, if implemented correctly over the course of this Parliament, is a step in the right direction. However, it is important that these exercises do not solely model the response to singular risks, but that to multiple simultaneous modes of attack. It is only through stress-testing complex simulations that vulnerabilities across the public and private sectors can be identified and addressed. (Conclusion, Paragraph 70)

The Government should conduct annual cross public sector-private sector exercises to specifically test the response to events in which multiple economic security risks manifest simultaneously. One example would be the scenario set out in the Strategic Defence Review: efforts to manipulate information, attacks on critical infrastructure, and wider attempts to disrupt the UK economy. These exercises could either form part of the National Exercising Programme or take place as a stand- alone wargame programme. (Recommendation, paragraph 71) Transforming the economic security toolkit

The evidence we have received, and a comparison with our allies, leads us to conclude that the UK’s economic security regime is no longer fit for the future. A whole-of-society approach must become the organising principle of Britain’s economic security. (Conclusion, Paragraph 78)

The UK’s approach to economic security shows less cross-government co-ordination than our most important international partners. The Government’s approach is characterised by siloed thinking, a lack of adequate institutional support, and a reliance on strategies that are vulnerable to churn as ministers and governments change. The abolition of the National Security Council’s Economic Security Sub-Committee leaves even less clarity as to how economic security will be factored in at the heart of Government decision-making. (Conclusion, Paragraph 86) 96

The Government must urgently reform Whitehall structures to improve cross-government co-ordination of economic security policy. We recommend that the Government learn from its own history, and following from the example of the 1920s it should: • Appoint a cross-Government Minister for Economic Security, based in the Cabinet Office. This Minister should have responsibility for coordinating economic security related policy across Government, and be made a permanent member of both the National Security Council and the Economic Security sub-committee. • Establish a new Office of Economic Security, that would bring together relevant expertise from across Whitehall, provide a platform for coordination with the private sector, and monitor the overall effectiveness of the UK’s toolkit. • Reinstate the Economic Security sub-committee of the National Security Council, with the Minister for Economic Security and the Secretary of State for Business and Trade as permanent members. • Introduce legislation which would implement the recommendations of this report, and put the economic security related components of pre- existing strategies onto a statutory footing. If the Government rejects the implementation of these measures, we recommend that it sets out in writing how it will improve cross- Government coordination, and ensure that its approach is driven by long-term goals. (Recommendation, paragraph 87)

Parliament and its committees must play a leading part in the national discussion around economic security, convening stakeholders from across sectors and advising Government on the strategic and cross- cutting steps needed to confront its challenges. Parliament, however, cannot hold the Government to account on its overall strategy for economic security if it is not able to access key information about the use of the UK’s toolkit. (Conclusion, Paragraph 91)

The Government should commit to supporting select committee scrutiny of its approach to economic security. This should include a commitment to at least biannual public evidence sessions with senior Ministers and officials, and to complying with all reasonable requests for written information. This should include regular and comprehensive reports on the operation of the UK’s economic security enforcement regimes, including sanctions, investment screening and export controls. (Recommendation, paragraph 92) 97

We acknowledge that some information may need to be provided in confidence, and we invite a dialogue between Government and Parliament to determine the appropriate parameters for this. (Recommendation, paragraph 93)

We reiterate the recommendation of our predecessor Committee, and recommend the Government explore ways of amending section 54 of the National Security and Investment Act 2021 to enable information relating to investment screening decisions to be shared with Parliament. (Recommendation, paragraph 94) Diagnose a shared understanding of threats

The severity and breadth of the threats facing UK economic security will require a step change in information sharing between Government and the private sector. Businesses need accurate, up-to-date and actionable insights in order to plan investments and work constructively with government. We welcome the positive change that the new Economic Security Advisory Service could bring as a centre for advice, guidance and support to industry. However, it is essential that the Service does not operate solely as a Government-led initiative, but provides a forum for wider information sharing both between the public and private sectors, and within the private sector. (Conclusion, Paragraph 105)

The Government should increase its ambitions for the Economic Security Advisory Service to ensure that it acts as a centre for collaboration and information-sharing. Alongside its proposed functions, its remit should also encompass: • The functions of the previous Economic Security Public-Private Forum, with National Protective Security Authority (NPSA) briefings and research collaboration advice provided to businesses; • Forums for businesses to discuss challenges and risks with both the Government, and other businesses, in order to share best practice and identify emerging threats; and • A facility to provide tailored guidance and support regarding state- based threats. We recommend that the Government follow, and build on, the example of the National Cyber Security Centre in facilitating effective public-private co- operation. This platform should be organised by the new Office of Economic Security. (Recommendation, paragraph 106) 98

Emerging technologies have the potential to profoundly impact the UK’s economic security. The UK’s protective measures must keep pace with new risks, while not harming the competitiveness of its own technology sector. An accurate cross-Government understanding of the national security implications of future technologies will be essential, to mitigate harms and inform joined-up policymaking. (Conclusion, Paragraph 110)

We recommend that the creation of a cross-Government technology forecasting unit. This would lead an annual technology forecasting process, to support a co-ordinated response to technological change and the risk of new harms across the UK’s economic security toolkit. This unit should be based within the new Office of Economic Security, to provide a cross- Government liaison point. (Recommendation, paragraph 111) Develop sovereign capabilities

Economic security requires a clear-eyed understanding of which capabilities the UK needs to deliver for itself. Yet it is still not clear to us or, more importantly, to business investors what sovereign and asymmetric capabilities the Government aims to develop. So far, its approach has focussed on highlighting areas of economic strength, with no assessment of the areas in which it is over reliant on foreign-owned resources. (Conclusion, Paragraph 123)

The development of these sovereign capabilities is likely require an approach to public expenditure that is novel and not reflected in UK Government accounting principles. These principles evolved in a different era when our economic security was less perilous. (Conclusion, Paragraph 124)

The Cabinet Office should work with relevant sector bodies and Departments, to identify and publish a list of the ‘sovereign capabilities’ the Government wishes to develop for the nation. We recommend that the Government learns lessons from the approach taken under Japan’s Economic Security Promotion Act in developing the UK list. It should include both sectors of strength, and areas in which the UK overrelies on foreign suppliers. The Government should then put forward clear long-term investment plans, supported by the National Wealth Fund, to encourage domestic production of priority capabilities. (Recommendation, paragraph 125)

We recommend that Government consult on the changes that may be required to the framework for managing public money in the face of challenges to economic and national security. This should include consideration of whether the tests underpinning managing public money 99 assessments adequately consider economic security imperatives and the benefits of securing both sovereign capabilities and critical supply chains. (Recommendation, paragraph 126) Diversify critical supply chains

An understanding of supply chains is critical to a “whole-of-society” approach to economic security. While the new Supply Chain Centre will analyse key inputs, it will do so only in the specific context of the eight growth-driving sectors in the Industrial Strategy. We are concerned that this will only add to the current muddled picture, with new siloed understandings of sectoral vulnerabilities but no overall understanding of the UK’s dependencies. The Government cannot take a strategic approach to sovereign capabilities without a clear understanding of the supply chains that support them. (Conclusion, Paragraph 132)

The Government should conduct a regular prioritisation exercise with industry and Parliament to identify the UK’s critical supply chains. This assessment should combine data regarding critical raw material needs, and possible supply chain disruptions or dependencies, across the economy. From this, the Government should identify which supply chains require strengthening to build the UK’s economic resilience. The results from the first of these exercises should be presented to Parliament within the next two years. (Recommendation, paragraph 133)

The Government’s attempts to diversify supply chains, and to safeguard sources of critical minerals, will not be successful unless there is a long- term plan for the UK’s supply chain. The forthcoming Critical Minerals Strategy is an opportunity to accelerate this work, and to set out clear priorities. The Government must however go further, and as a matter of policy pursue an alliance of free-trading democracies - such as Canada, which has considerable rare-earth assets - prepared to collaborate in securing mutual supply chains and critical mineral supplies and countering coercive economic behaviour. (Conclusion, Paragraph 140)

We recommend that the Government’s forthcoming Critical Minerals Strategy: • Sets specific targets for domestic production, recycling and processing. • Clearly sets out the UK’s approach to diversifying these supply chains through bilateral agreements with allies. • Designates ‘Critical Mineral Clusters’ which would benefit from streamlined planning processes and support in accessing finance. 100 This should be accompanied by clear investment plans for both developing strategic stockpiles and diversifying these supply chains, co- financed by the National Wealth Fund. (Recommendation, paragraph 141) Defend critical infrastructure, assets and sectors

Economic security cannot be achieved without cyber security. The spate of cyber-attacks in 2025 has underlined their potential to devastate not just targeted companies, but consumers and wider supply chains. We welcome the steps being taken to build the UK’s cyber resilience, but these efforts need to be redoubled in light of recent events. (Conclusion, Paragraph 145)

The Government’s Software Security Code of Practice is a useful first step in encouraging the take up of “secure by design” principles amongst software providers. Compliance with these principles, however, should be the minimum standard rather than a voluntary extra. More needs to be done to ensure that companies are not able to sell software that does not meet cybersecurity standards without being held to account for the damage it may then cause. (Conclusion, Paragraph 149)

We recommend that the Government introduce legislation that would mandate the standards set out in its Software Security Code of Practice. Enforcement agencies should be empowered to monitor compliance, and levy penalties against firms that do not adhere to these rules. (Recommendation, paragraph 150)

The cost of cyber resilience has increased significantly in recent years. Key upgrades to software and other IT services are often now made via payments to subscription services rather than one-off purchases, meaning that they are categorised as revenue rather than more tax- efficient capital expenditure. Improved cyber resilience is therefore having a bigger impact on company bottom lines. Businesses should not be forced to choose between resilience and profitability. Government must do more to incentivise investments in cyber security. (Conclusion, Paragraph 153)

The Government should amend the capital allowances regime to allow businesses to claim tax relief on subscription-based IT services that directly enhance operational resilience, such as cybersecurity software, legacy system upgrades, business continuity platforms and data protection solutions. A consultation on how this could best be achieved should be launched before the end of the year. (Recommendation, paragraph 154) 101

The UK Government will not be able to confront the threat posed by cyber- attacks without an accurate understanding of the scale of the problem. Currently large British companies are not required to report cyber-attacks. This is detrimental to national economic security. A full picture of these incidents is essential to not only the Government, but also to industry, helping both to better understand evolving threats and mitigations. (Conclusion, Paragraph 158)

We recommend that the Government consult on proposals for a mandatory malicious cyber incident reporting regime. (Recommendation, paragraph 159)

With greater and greater private ownership of public risk, there has never been a greater public interest in ensuring that private firms are able to prepare for disruption and recover quickly when it occurs. Risk is inevitable in private enterprise, and the public purse should not be substituted for an effective market. However, the increasingly complicated threat landscape means that the time is now ripe for Government to look again at the insurance market to ensure that it is functioning adequately. (Conclusion, Paragraph 164)

The Government should urgently consider expanding the scope of reinsurance schemes such as Pool Re to support private markets which enhance business resilience, particularly in respect of cyber threats. (Recommendation, paragraph 165)

A whole-of-society approach means recognising that firms are only as secure as the weakest link in their supply chain. A small company can play an economically critical role. SMEs require more support in their efforts to confront an ever more volatile and uncertain internationalenvironment. This support needs to go beyond new guidance and ensure that smaller firms have access to the necessary funding to implement security measures that improve both their resilience and security and that of the national economy. (Conclusion, Paragraph 170)

The Government should establish a dedicated SME Resilience Fund, administered by the Department for Business and Trade, to target support at enhancing the cyber resilience of smaller businesses. This fund should integrate with the Government’s new Secure Innovation Reviews, by supporting businesses with the money required to make the improvements identified. (Recommendation, paragraph 171)

The UK economy needs large quantities of trusted investment. With the UK’s growing capital requirements, the Government needs to strike the right balance between facilitating the flow of capital and blocking dangerous acquisitions. The Government is right to recognise that components of the UK’s investment screening regime have become too burdensome. It 102 should also, however, go further and consider ways in which this tool can be modernised to encourage investment from trusted sources into critical sectors of the UK economy. (Conclusion, Paragraph 176)

We recommend that Government develop an accreditation scheme for providers of trusted capital, similar to the models used in the United States. Accredited investors should benefit from faster turnaround times within the UK’s investment screening process, as well as continuous access to dedicated case management at all stages. A marketplace should then be created to connect these investors to companies in critical sectors of the UK economy. (Recommendation, paragraph 177) Deter threats

Economy security requires not just resilience at home, but also effective deterrence of future threats. Improving the deterrent effect of trade sanctions and export controls requires greater transparency in enforcement outcomes. Breaches of either sanctions or export controls, even when resulting from error, are a serious matter, and businesses should not always be able to avoid the reputational harm of being publicly identified when they commit a breach. This is already recognised in the context of financial sanctions, where disclosure of breaches is already commonplace. (Conclusion, Paragraph 183)

Building on the 2022 recommendation of the Committees on Arms Export Controls, we ask the Government to clarify if there are any situations whatsoever in which it believes disclosure of the names of companies or individuals that enter into compound settlements for breaches of trade sanctions and strategic export controls would be lawful and in the public interest. Where such barriers may exist to limit disclosure, these should be removed. (Recommendation, paragraph 184)

Abuse of company registration has the potential to undermine the UK’s deterrence regime. Companies House’s new powers have the potential to make a significant difference in the fight against economic crime. In order to be effective, its implementation of these powers must focus on a significant improvement in the frequency of enforcement action. (Conclusion, Paragraph 187)

We recommend that Companies House steps up its disclosure of successful enforcement activity. The names of individuals who have been successfully prosecuted should be disclosed immediately following conviction, to both name and shame those involved in wrongdoing, and to highlight Companies House’s progress in improving its approach to enforcement. (Recommendation, paragraph 188) 103

The UK’s ability to deter economic threats depends upon agencies having the necessary staff in place to investigate wrongdoing. Currently, the UK depends on professionals committed to keeping the country safe, but today’s pay scales mean that frontline enforcement agencies cannot attract the staff they need to adequately police the threat. Disparities with the private sector are significant - but so are disparities with the salaries of other public servants in similar ranks. (Conclusion, Paragraph 192)

We recommend that the Government urgently considers changing pay scales at organisations such as the National Crime Agency and Companies House, to ensure that salaries of mission critical staff keep pace with industry and fully reflect the indispensable work they do. (Recommendation, paragraph 193)

In today’s volatile geopolitical climate, the UK must be able to defend itself against economic coercion from hostile actors. The Trade Strategy correctly recognises that today’s trade remedies system does not adequately protect us against emerging economic threats. As economic coercion becomes more prevalent, the Government must go further and consider whether a new framework is now required to adequately protect the UK from coercive economic practices. (Conclusion, Paragraph 198)

The Government should establish a specific Anti-Coercion Instrument, and urgently launch a consultation on its design. Measures proposed should include a formal framework for responding to economic coercion and widening the available countermeasures to include restrictions on services trade, limitations on foreign direct investment and public procurement, and the suspension of intellectual property right protections. (Recommendation, paragraph 199) Dovetail approaches domestically and internationally

Economic security must form a core component of the UK’s international trading and geopolitical relationships. We reiterate our recommendations to deepen economic security co-operation with the United States, European Union and Asia-Pacific countries. In particular, a central pillar of the UK’s trade strategy must be the establishment and maintenance of Western leadership in the race for technological superiority, particularly against China. Trade negotiations must identify opportunities to reinforce supply chain security through co-operation with allies, by exploring similar mechanisms to those being pursued in negotiations with the Republic of Korea. (Conclusion, Paragraph 208) 104

We welcome steps to establish economic security dialogues, but encourage these to develop in a more structured way. The ultimate aim of these endeavours should be an alliance of free trading democracies, leveraging bilateral and multilateral trading relationships to secure supply chains and counter coercive activities. (Conclusion, Paragraph 209)

The Government should prioritise in trade negotiations measures which will mutually benefit the economic security of the UK and key partners. The UK should proactively identify opportunities to align its economic security approach with those of trading partners. The Government should also commit to ongoing, structured dialogue with the United States, the European Union and Asia-Pacific countries on economic security, including supply chain resilience, investment security and technology leadership. (Recommendation, paragraph 210)

The UK has long benefited from the maintenance of an open international trading system. It must not acquiesce in the erosion of a global trading system that it is in our national interest to defend and to advance. The UK should continue to use its international influence to build support for renewed adherence to these rules. (Conclusion, Paragraph 213)

We recommend that the Government approach its engagement with multilateral institutions with a renewed focus on the promotion of the rules- based trading system. It should set out to us in writing, with examples, how it is doing so. (Recommendation, paragraph 214) 105