Source · Select Committees · Defence Committee
Recommendation 5
5
Paragraph: 27
The Ministry of Defence’s open and country-agnostic approach to foreign involvement means that the defence...
Recommendation
The Ministry of Defence’s open and country-agnostic approach to foreign involvement means that the defence supply chain has been open to potentially hostile foreign involvement, with reports of companies being owned and influenced by foreign Governments whose values and behaviours are at odds with our own and who are known to engage in intellectual property theft. The Ministry of Defence should publish a list of countries it Foreign Involvement in the Defence Supply Chain 31 considers friendly and from whom investment should be encouraged. All those countries falling outside of this list should be barred from investing in the UK’s defence supply chain, including China and Russia.
Paragraph Reference:
27
Government Response
Acknowledged
HM Government
Acknowledged
The open and country-agnostic approach to foreign involvement in the defence supply chain mirrors the wider approach followed across Government, which has worked to the benefit of the UK. As the Committee is aware, the overwhelming majority of investments in the UK’s economy raise no national security concerns. As an open economy, we welcome foreign trade and investment where it supports UK growth and jobs, meets our stringent legal and regulatory requirements and does not compromise our national security. The Government will continue to monitor transactions where there are potential national security concerns from any country–and investigate and apply appropriate mitigations where required. We note the Committee’s recommendation that the MOD should publish a list of countries considered to be friendly. We understand the Committee’s intent, recognising the importance of the defence sector and its supply chains to our national security and the development of innovative and first-class military capabilities. But the Government considers that our current risk-based approach to foreign investment remains appropriate, whereby each case is examined individually, and considers the ownership of the proposed acquirer, the nature of the target company and the type of work that it undertakes. This approach reflects the fact that the ostensible domicile of an investor does not in itself, provide a complete and fully accurate indication of the potential level of security risk. We also think that a determined hostile actor could seek to obscure the ultimate acquirer by using companies it owns in countries on the ‘friendly list’, hence the requirement for case- by-case analysis. Our risk-based approach will be further strengthened by the additional protections that will be introduced by the country agnostic NSI Bill for which the Committee has expressed its support. The MOD - and other Government departments - will continue to scrutinise foreign acquisitions on a case-by-case basis to ensure we can best protect our defence industry and the wider economy, without taking a pre-emptively discriminatory approach. With strong measures in place, we will act to protect our national security interests regardless of the source of the investment.