Investors Say UK National Security Legislation Threatens Startups

A new United Kingdom law enacted to protect the nation’s security could chill investment in startups, the Financial Times reported.

The National Security and Investment Act (NSIA), which took effect in January, gives the government power to intervene in any business transaction, such as an acquisition, to protect national security. Proponents say it is designed to provide businesses and investors with the certainty and transparency they need to do business in the U.K. and control Chinese acquisitions of assets in the U.K.

But critics, including the Scottish Angel Capital Association (LINC), a trade group for angel investors, said the law could curb overseas investment in U.K. startups.

Jock Millican, the group’ chairman and director of Equity Gap, an Edinburgh-business angel syndicate, said the broad language in the NSIA risks the failure of otherwise viable startups.

A substantial portion of stock investment in Scottish Enterprise, the Scottish government agency that routinely invests with angels in early-stage companies, will be affected by the new law, a source told the news outlet.

The measure requires the state agency to get approval from the U.K.’s Department for Business, Energy and Industrial Strategy, before investing in range of ventures.

From 2020 through 2021, the Scottish Enterprise invested 78 million euros ($105.7 million) in 177 companies.

The U.K. is not the only region concerned about how deals could impact national security.

See also: US Probes Alibaba’s Cloud Unit Security on US Consumer Data Concerns

Last month, a report said the Biden administration is looking at Alibaba’s cloud business and determining whether that facet of the eCommerce titan is a risk to U.S. national security.

The probe will examine how Alibaba stores data, including personal info and intellectual property, and will try to identify whether the Chinese government can gain access to it.