Recommendation 3

HM Government Acknowledged

As the Committee is aware, the MOD wants to source the best solutions for our requirements. This naturally means that there is significant foreign involvement in the defence supply chain. Given the scale, depth and complexity of our defence supply chain, we focus our supply chain monitoring efforts on critical capabilities. The MOD is undertaking detailed supply chain visibility and risk assessment programmes, which includes foreign ownership. Foreign investments, regardless of their country of origin, are subject to thorough scrutiny and must satisfy our robust legal, regulatory and national security requirements. Where necessary, the Government will investigate and apply appropriate mitigations. The Government recognises the risks associated with more sensitive procurements, and - where appropriate - undertakes such activity with trusted suppliers only. Measures in place to protect UK intellectual property (and prosperity, operational advantage and freedom of action) include export controls, a rigorous investment screening regime, capability assurance, patent controls, research licenses, protective security and outreach campaigns to stakeholders including UK business. Whilst noting the Committee’s concern regarding a Chinese presence within the defence supply chain, we consider that the extant, risk-based approach continues to be the most appropriate counter to potentially hostile investment, whereby each case is judged individually on the basis of the relevant facts. The recent examples of transactions involving Cobham, Inmarsat, Mettis Aerospace and Impcross have demonstrated that, where foreign ownership raises national security issues, the Government is prepared to use existing powers to intervene and to ensure that any such concerns are assessed and properly mitigated. The National Security and Investment (NSI) Bill will introduce enhanced powers for reviewing and intervening in business transactions that might raise national security concerns.