- within Energy and Natural Resources topic(s)
Four years on from the entry into force of the National Security and Investment Act 2021 (NSIA), the UK Government is set to implement its first update to the mandatory notification categories, increasing the number of “sensitive sectors” under the regime. The proposed changes provide further clarity in some areas, and are forecast to slightly increase the overall number of mandatory notifications. The key changes include introducing Water as a new notifiable sector, a new standalone category for Critical Minerals, and a tightening of the AI category's scope.
On 12 March 2026, the UK Government published the outcome of its consultation on the NSIA (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (the NARs). The document, given its focus on the NARs, does not touch upon or provide any update on the proposed reforms to the NSIA itself the Government announced in 2025 - specifically, removing mandatory notification requirements for internal reorganisations and the appointment of liquidators or special administrators (which are intended to “ease the burden on businesses”).
The NSIA is the UK's standalone regime for screening acquisitions of control over entities and assets on national security grounds. Where the target operates in one of the “sensitive sectors” defined by the NARs, and the transaction constitutes a “trigger event” under the NSIA, the relevant acquirer must obtain Government approval before completing the transaction. The NARs have not been updated since coming into force on 4 January 2022.
The present consultation was launched back in July 2025, off the back of an April 2024 Call for Evidence. The consultation document already set out some proposed changes to the drafting of the NARs, and with the publication of this consultation outcome, further changes are being introduced. The precise details of all the changes are yet to be revealed, but the key takeaways for businesses at this stage are:
- the number of mandatory notification sectors will increase from 17 to 19, with a new standalone category for Semiconductors1, Critical Minerals being carved out of the existing Advanced Materials category, and Water being introduced as an entirely new notifiable sector;
- the AI category will be narrowed to avoid capturing businesses that simply use off-the-shelf AI tools in their operations - refocusing the definition on entities engaged in AI research and development; and
- the draft revised NARs are expected to be published later this year, although precise timing remains uncertain.
The changes to the AI and Critical Minerals categories provide practitioners with further clarity, and may be of particular interest to businesses given the relatively broad scope of these categories under the current NARs. However, any consequent reduction in the number of notifications made on a precautionary basis appears likely to be more than offset by some of the other changes, which will bring more businesses into scope (at the consultation stage, the Government estimated the changes would lead to between 10 fewer and 35 more mandatory notifications per year).
Artificial Intelligence
The Government proposes to revise the AI category, drawing a clearer line between businesses that simply use AI tools and those engaged in AI research and development.
The existing Schedule 3 NARs for AI had been criticised by respondents to the Call for Evidence as being too broad and capturing activities that would normally have no national security implications.
The Government’s initial proposed changes to the drafting of the schedule sought to address this. However, consultation respondents raised concerns that the proposed drafting changes still risked capturing routine, low-risk business activities, and in particular the use of off-the-shelf AI products.
In response, the Government intends to narrow the scope of the activities caught, so that only entities that create or modify the AI systems themselves will be in scope. The Government will also introduce three express exclusions: (i) the use of non-consumer AI systems for routine business activities; (ii) the use of licensed third-party AI systems; and (iii) certain modifications to, and testing of, AI systems carried out as part of routine business deployment activities and IT policies.
At the same time, the Government proposes to amend the category to capture, among other things, the development of AI systems where this results in the technology becoming unavailable to consumers, creates or improves AI capabilities, or increases the speed of computation.
Critical Minerals
The Government will carve out Critical Minerals from the Advanced Materials category and create a new standalone sector for them.
The new category will cover all 34 minerals identified as critical by the UK Critical Minerals Intelligence Centre - expressly rejecting calls to reduce the list, including in respect of more commonly occurring minerals such as aluminium, iron and helium (which are not currently in the NARs, but are proposed to be added), on the basis of their potential defence and dual-use applications. The Government will build on the existing Advanced Materials category by introducing definitions for four distinct activities: exploration, extraction, processing and recycling.
The response has left open the prospect of future additions, stating that it will consider whether further minerals should be brought within scope, in line with the 2025 UK Critical Minerals Strategy. The new Critical Minerals category will also be forward-looking, covering minerals that currently have low domestic production volumes, but where output is projected to increase.
That said, the Government does propose to narrow the scope in two respects: by limiting the definition of "enabler"; and clarifying which exploration and extraction land rights fall within the regime, in each case to ensure that low-risk activities are not caught.
Other key changes
Beyond AI and Critical Minerals, the Government has proposed a number of further amendments to the NARs, as follows.
- A standalone Semiconductors category will be created, carved out of the Advanced Materials category and merged with the existing Computing Hardware category. At the same time, some new in-scope activities will be added. The Government hopes this will result in a single, more coherent definition, that is clearer to businesses whilst addressing certain gaps in the present regime.
- Water will also be brought within the regime as a new notifiable sector. This will capture regulated water and sewerage undertakers with a statutory duty to supply water and/or sewerage services to premises within a specific geographical area.
- Minor drafting amendments are also planned for the Data Infrastructure, Communications, Critical Suppliers to Government, Energy, Suppliers to the Emergency Services and Synthetic Biology categories.
Notably, no amendments to the Defence category are expected, notwithstanding stakeholder feedback that its scope is overly broad. The Government has taken a more conservative position, arguing that the breadth of this category is a deliberate feature of the regime. Instead, it will update guidance on when subcontractors are in scope, to reduce the volume of "unnecessary" notifications.
Commentary
These changes have been a long time coming, and it is still unclear when they will come into effect, as no timeframe has been given for the passing of the necessary secondary legislation.
In any event, it does not appear that the amendments will meaningfully reduce the high volume of low-risk notifications that currently need to be made under the NSIA regime. As noted above, the Government estimated at the consultation stage that the resultant net change in mandatory notifications is likely to be between 10 fewer and 35 more per year - from a baseline of approximately 1,000 NSIA notifications in 2024/25.
Some of the incoming clarifications to the NARs are, however, likely to be welcomed. For example, as AI becomes increasingly integrated into most workplaces, the revisions to the AI category should address concerns that the existing definition captures businesses that use third-party AI tools as part of their internal processes. And whilst the new standalone Critical Minerals category is likely to widen the regime's reach, the addition of definitions for concepts such as “processing” (which is included in the existing NARs without a definition) appears helpful, clarifying that ordinary course downstream product manufacturing, which simply uses a critical mineral as an input into a product, will not be captured.
For now, the current NARs remain in force and notification obligations must be assessed against the existing sector definitions. That said, investors and businesses in the affected sectors should begin familiarising themselves with the proposed changes now, particularly where their activities may fall within new or revised categories.
Trainee solicitor Fezaan Akram contributed to this article.
Macfarlanes is a pre-eminent law firm advising a global client base across Private Capital, Private Wealth, M&A and Disputes.
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