The UK's defence industry has become a prized target for foreign investors, sparking intense scrutiny from government ministers. Data obtained through a Freedom of Information Request reveals that the Investment Security Unit (ISU) 'called in' 24 proposed bids from overseas buyers between January and March this year, with 10 deals focused squarely on the nation's vital defence sector.
Breaking down these defence-related bids, it emerges that nine came from foreign private equity firms or investment banks, while one originated from a sovereign wealth fund or state-owned entity. This trend underscores the attractiveness of UK defence manufacturing capabilities to international investors, who are drawn by the sector's reputation for quality and innovation.
However, experts warn that this also raises significant national security concerns. Sensitive technologies and data could fall into potentially adversarial hands if foreign entities gain control of key defence companies. The defence sector topped the list of probed foreign private equity acquisitions, followed closely by critical government suppliers, with eight such deals undergoing scrutiny.
The government's increased vigilance is partly driven by a perception that UK public markets are undervalued compared to their international counterparts. This has made British companies in strategic sectors appealing acquisition targets for foreign investors. The Investment Security Unit was established to anticipate the National Security and Investment Act, which granted the government enhanced powers to intervene in deals that could pose a risk to national security.
A spokesperson for the government maintained that all acquisitions are considered on a case-by-case basis, balancing open investment with national security protection. Meanwhile, Labour Party leader Sir Keir Starmer recently outlined a £15 billion defence investment plan, aimed at bolstering the sector. However, this proposal reportedly fell short of the funding military officials had been seeking.
The ISU has also scrutinised bids from state-owned operations targeting artificial intelligence and data infrastructure companies, reflecting broader governmental concerns over the control of critical national assets and technologies. The overall increase in foreign takeovers on the London market underscores the pressure on ministers to balance economic openness with safeguarding national security.