Key takeaways
New mandatory sectors added
Government introduces Critical Minerals, Semiconductors and Water sectors.
Scope of existing sectors updated
Most existing mandatory sectors refined for clarity and risk.
Legislation changes coming soon
Draft secondary legislation expected later this year. Businesses should review any transactions in the pipeline in light of the new and updated mandatory sectors.
The National Security and Investment Act 2021 (NSIA) was introduced on 4 January 2022 which established a regime allowing the Government to review transactions which may pose a risk to national security, including in 17 sensitive areas of the economy (known as the 'Mandatory Sectors') where a notification obligation is mandatory. Under the NSIA, the Government can impose conditions on acquisitions or even block or unwind transactions.
Consultation
On 14 October 2025, the Government closed their consultation on the National Security and Investment Act (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (the Consultation). The aim of the consultation was to loosen the NSIA scope on certain transactions, reflect areas where there are new risks and to improve clarity around certain sectors.
On 12 March 2026, the Government announced its response to the Consultation that will be adopted into legislation. The largest change will be the creation of three new Mandatory Sectors: Critical Minerals; Semiconductors and Water, bringing the total number of Mandatory Sectors to 20. The Government has also made amendments to certain of the existing 17 Mandatory Sectors.
We have set out below a brief explanation of the changes proposed to be made following the Consultation.
Critical Minerals
Under the Consultation, the Government has confirmed a new mandatory sector for 'Critical Minerals'.
Prior to the Consultation, certain minerals fell within the 'Advanced Materials' Mandatory Sector. However, feedback from stakeholders was that further clarity was needed on which critical minerals fell within that Mandatory Sector.
The definition of Critical Minerals covers all 34 minerals identified as critical by the UK Critical Minerals Intelligence Centre (which can be seen here) and includes aluminium, iron, magnesium, nickel, tin and titanium. Activities caught will include research, development or production, exploration, extracting, recycling and processing of such Critical Minerals. The Government believes that the UK’s volume of critical minerals will increase from 2030 onwards as demand for net-zero technologies and advanced manufacturing increases, hence the need for a standalone Mandatory Sector.
Semiconductors
Under the Consultation, the Government has confirmed a new mandatory sector for 'Semiconductors'.
Similar to 'Critical Minerals', certain semiconductors were included in the definition of the 'Advanced Materials' mandatory sector. Stakeholder feedback was again that the current definition of Advanced Materials needs to be narrowed and simplified to make it easier for non-experts to interpret the definition.
Under the Consultation, the Government proposes to create a new 'Semiconductors' mandatory sector. Whilst the definition will be carved out of the existing definitions under the Advanced Materials, it will also add advanced packaging techniques and activities involving the wider design process of processing units and chips.
Water
The Government will creating a new sector, which unlike Critical Minerals and Semiconductors, was not covered by any of the previous Mandatory Sectors. Under this new Mandatory Sector, the Government intends for New Appointments and Variations (NAVs) to be caught, but subject to a minimum threshold so that only larger NAVs are caught.
The reason for the addition of Water as sector is that the Government predicts that between 2025 and 2030, the UK water sector will receive £100 billion of investment, and the Government wants to ensure that the Government has the necessary screening intervention powers to protect national security, and to also ensure that such investment is in line with the Government’s growth mission in this area.
Changes to existing 17 Mandatory Sectors
In addition to the carving out of Critical Minerals and Semiconductors to the Advanced Materials sector as set out above, the Government has confirmed that they will also make minor changes to all but three of the existing Mandatory Sectors. The three sectors that the Government will not make any changes to are Defence, Military & Dual Use and Transport. Defence is the Mandatory Sector with the highest number of notifications under the NSIA regime (56% of NSIA notifications submitted in 2024-2025). Similarly, in the previous reporting period, Defence accounted for 48% of all notifications. However, the Government has confirmed that it will update the associated guidance on the Defence sector to help give clarity on which transactions are caught, especially around whether certain subcontractors in the Defence sector are caught.
Next steps
There is no firm date for when the new rules giving effect to the Consultation will come into force. However, the Minister responsible for the NSIA has indicated that the draft secondary legislation is expected to be laid before Parliament later this year. Nonetheless, businesses should begin assessing whether any transactions in their pipeline may fall within the new or updated Mandatory Sectors once the changes take effect.
