UK National Security and Investment Act reforms: what the proposed new Critical Minerals regime means for dealmakers

The UK Government has published its formal response to the consultation on updates to the Notifiable Acquisition Regulations (NARs) under the National Security and Investment Act 2021 (NSI Act). The response confirms a series of targeted reforms to the mandatory notification regime. Secondary legislation is expected to be laid before Parliament later this year, with updated guidance to follow. Until then, the existing rules remain in force.

This article summarises the background to the NSI Act, examines in detail the new standalone Critical Minerals schedule, which is likely to be of particular interest to investors and businesses operating in the mining, extraction, and materials supply chain, and outlines other key changes confirmed in the consultation response

What is the UK National Security and Investment Act and why does it matter for transactions?

The National Security and Investment Act 2021 came into force in January 2022, establishing the UK's statutory regime for screening acquisitions and investments on national security grounds. The NSI Act gives the Government the power to scrutinise and, where necessary, intervene in business transactions, including mergers, acquisitions, and the purchase of minority stakes, that could pose a risk to national security.

The centrepiece of the regime is the mandatory notification system. Under this system, proposed acquirers of shares or voting rights that cross defined thresholds (more than 25%, more than 50%, or 75% or more) in an entity carrying on specified activities in the UK in certain sensitive sectors must notify the Government and obtain approval before the transaction can complete. Completing a notifiable acquisition without prior approval renders the transaction void and may give rise to civil and criminal penalties.

The sectors subject to mandatory notification are set out in the NARs, which originally identified 17 sensitive areas of the economy. These range from advanced materials, defence and artificial intelligence to energy and data infrastructure. The NARs have not been updated since they came into force alongside the NSI Act in January 2022, and the Government's consultation represented the first comprehensive review of their scope and definitions.

The changes being introduced include the creation of new standalone schedules for Critical Minerals and Semiconductors, which will be carved out of the existing Advanced Materials category, and a new schedule for Water.

What is the new Critical Minerals schedule?

The creation of a standalone Critical Minerals schedule is one of the most consequential changes for investors in the mining, extraction, processing, and recycling sectors, and for any business involved in the critical minerals supply chain.

Critical minerals, including lithium, cobalt, rare earth elements, and others, are essential inputs for a wide range of advanced technologies, from electric vehicle batteries and wind turbines to defence systems and semiconductors. The Government's decision to carve Critical Minerals out of the broader Advanced Materials schedule and establish it as a distinct notifiable sector reflects the heightened strategic importance of these materials, particularly in light of the Government's 2025 UK Critical Minerals Strategy and the work of the UK Critical Minerals Intelligence Centre (CMIC).

Under the existing NARs, critical minerals were covered within the Advanced Materials schedule, which also encompassed semiconductors and a range of other dual-use materials. Stakeholders had long noted that this grouping was unwieldy and lacked the specificity needed to provide clear guidance to businesses operating in the minerals sector.

Which Critical Minerals will fall within scope of the UK NSI Act?

The consultation proposed, and the Government has confirmed, that the new Critical Minerals schedule will cover all 34 minerals identified as critical by the CMIC's latest criticality assessment. The 34 critical minerals set out in CMIC assessment are listed at the end of this article. In addition, the schedule will retain strategically important minerals necessary for defence or scientific purposes that do not appear on the CMIC's list. The Government has also indicated that it will further consider whether additional minerals should be brought into scope, in line with those highlighted in the 2025 UK Critical Minerals Strategy.

Several consultation respondents questioned the inclusion of more common minerals such as iron, aluminium, and helium within the schedule. The Government has confirmed that it does not intend to reduce the list of minerals in scope, citing the possible defence and dual-use purposes for these materials. The schedule is deliberately drafted to account for future activities and projected increases in UK critical mineral production, hence the inclusion of some minerals with low current UK production volumes.

Which Critical Minerals activities will trigger mandatory notification in the UK?

The new schedule builds on the relevant parts of the existing Advanced Materials schedule and introduces specific definitions for key activities in the critical minerals value chain. These include exploration, extraction, processing, and recycling.

In response to feedback the Government proposes amending the definition of an "enabler" and limiting which exploration and extraction land rights will be caught, to ensure low-risk activities are not caught.

The Government has committed to publishing detailed guidance on the entities and activities in scope of the new schedule.

What other NSI Act changes affect UK investors and businesses?

Alongside the creation of the new Critical Minerals schedule, the Government will make clarifying amendments to other schedules and also will:

• Create a new standalone schedule for Semiconductors - The current Computing Hardware schedule will also be folded into the new Semiconductors schedule.
• Introduce Water as a new notifiable sector - Water and sewerage undertakers will be brought into scope.
• Narrow the Artificial Intelligence schedule - The Government will refocus the schedule on entities that create or materially modify artificial intelligence (AI) systems. In most cases, entities involved only in the end-use of AI systems, including routine business use of non-consumer AI, use of licensed third-party AI, and modifications made as part of routine IT deployment, will be excluded from mandatory notification.

The Government will not make further changes to the Advanced Materials.

What do the NSI Act changes mean for UK transactions and investors in Critical Minerals?

The creation of a standalone Critical Minerals schedule will bring greater visibility to the notification obligations that apply to transactions in this sector. However, the expanded list of minerals in scope and the introduction of new qualifying activities mean that more transactions are likely to require mandatory notification than under the current regime. The inclusion of definitions of activities such as processing will offer welcome clarity to what is covered, and also what will be excluded, from the regime.

The proposals set out by the Government are currently high level and additional detail is needed to determine whether additional minerals will be brought into scope and to clarify the definitions of the specified activities. We will provide further updates when the Government produces this detail, the amended schedules and the associated guidance.

UK critical minerals list 2024

The below list has been extracted from the UK Critical Minerals Intelligence Centre UK 2024 Criticality Assessment.

When are the new UK NSI Act Regulations expected to take effect?

The Government intends to lay secondary legislation before Parliament later this year to implement the confirmed changes. Updated guidance will be published alongside the legislation. Until the new regulations come into force, the existing NARs continue to apply in their current form.

For further guidance on how the evolving NSI framework may apply to your transactions, please contact Charles Bond from our Mining team or or Samuel Beighton or Rhiannon Pugh from our Competition Law team.