UK Expands NSIA Mandatory Regime to Cover Water Sector & Clarifies Scope of Semiconductors, Critical Minerals and AI Schedules

Background

On 12 March 2026, the UK government confirmed that important changes will be made to the National Security and Investment Act (NSIA) Notifiable Acquisition Regulations (NARs) and the scope of the NSIA mandatory notification regime. The changes follow the consultation that closed in October 2025 (see related Akin Alert here) and represent the first major developments since the NSIA came into force in January 2022. The UK government continues to refine the NSIA on an iterative basis, incorporating feedback from businesses and stakeholders (for example, narrowing the scope of the Artificial Intelligence schedule) while balancing the constantly evolving risks to national security (including confirmation that the water sector will be included within the NSIA mandatory notification regime).

Key Takeaways

• Extension of Mandatory Notification Regime to the Water Sector: Acquisitions in the water sector will now fall within the mandatory regime, reflecting the scale of expected investment (including foreign investment) and the sector’s criticality.
• Standalone Critical Minerals and Semiconductor Schedules: These schedules will be separated from the Advanced Materials schedule to reflect their strategic importance and to simplify compliance. The government has not ruled out further expansion of the Critical Minerals to “growth minerals”, such as copper and uranium.
• Excluding ‘Off the Shelf’ Artificial Intelligence (AI): ‘Off the shelf’ AI and licensed third‑party AI systems, as well as routine business use or minor modifications of AI systems, will be expressly excluded from the scope of mandatory notification regime, focusing scrutiny on higher‑risk AI applications.

Extending the Mandatory Notification Regime to the Water Sector

As anticipated, and with the support of all consultation respondents who provided comments, the UK government has confirmed that the NSIA mandatory notification regime will be extended to include acquisitions within the water sector, focusing on major water companies and larger independent providers. However, the government has confirmed that companies in the general water supply chain will not be subject to mandatory notification. Bringing the water sector within scope of the NARs brings the UK in line with many other investment screening regimes, and reflects the government’s view that the scale of investment into critical infrastructure—over £100 billion is expected between 2025 and 2030, with much of this likely to be from foreign investors—justifies automatic and upfront scrutiny because of the associated risks to national security.

The move marks the first sector to be added to the NARs since the NSIA came into force, and demonstrates that the government continues to actively monitor key industries and will act where new national security risks (such as a significant influx of foreign investment) arise. While there are no additional sectors currently being officially considered for inclusion within the NARs, businesses operating in sectors relevant to national infrastructure, critical supply chains and national security not already covered should monitor the developing regulatory landscape.

New Schedules for Critical Minerals and Semiconductors

The government has also confirmed that Critical Minerals and Semiconductors will be carved out of their existing NARs schedules, along with certain amendments. Not only will standalone Critical Minerals and Semiconductors schedules simplify the Advanced Materials schedule, but the change also reflects the strategic importance of these inputs and the UK government’s holistic approach to securing national resilience. 

• Critical Minerals: The government declined to reduce the expanded list of minerals in scope for the Critical Minerals schedule, noting that the expanded list—which includes the likes of aluminum, iron and silicon—covers all 34 minerals identified as critical by the UK Critical Minerals Intelligence Centre. Importantly, the government explicitly leaves open the potential for additional minerals to be included in the schedule, in line with the 2025 UK Critical Minerals Strategy. This presumably means that “growth minerals”—such as copper and uranium—are very much candidates for potential inclusion in the future.
• Semiconductors: Similarly, the government has confirmed that the Semiconductors schedule will remain broad in scope, including declining to remove more mature technologies from the schedule or narrow the definition of “enabler”.¹ The government also expressly rejected narrowing the schedule to exclude mature technologies, citing the risk of creating “significant gaps”. The government clearly acknowledges the dual-use and foundational nature of semiconductors, serving as integral inputs for other critical technologies, and the broad schedule ensures the government can scrutinise the integrity of critical supply chains. However, the government has committed to providing guidance on the Semiconductors schedule so that stakeholders have a greater understanding of what technologies are indeed covered.  

Notably, semiconductors are also subject to extensive export controls. The NSIA changes reinforce the need for coordinated investment‑screening and export‑control analysis on transactions involving, for example, semiconductor design, fabrication or enabling equipment—especially for technologies with potential military‑end‑use or cyber‑surveillance applications.

These announced changes also align with the government’s broader approach in export-controls policy, which increasingly targets advanced technologies which are not just considered critical from a ‘dual-use’ (i.e. military and civilian use options) but also from an economic security perspective. Businesses should therefore expect continued convergence between NSIA scrutiny and export‑control considerations when dealing with advanced and critical (from an economic security perspective) technologies. This follows similar regulatory trends developing in the US as well as the European Union and China.

Streamlining of Artificial Intelligence Schedule and Other Amendments

While the government has widened certain aspects of the NARs, it has also sought to narrow the scope of the Artificial Intelligence schedule. Importantly, ‘off the shelf’ AI—including licensed third-party AI systems, as well as non-consumer AI for routine business activities—will be excluded from the mandatory notification regime. The changes will result in fewer notifications, while also encouraging wider diffusion of AI uptake across the economy (which is a key goal of the UK government’s growth agenda). It also reflects the UK government’s continued efforts to cut regulatory red tape wherever possible, adopting a proportionate approach to low-risk activity within the sensitive sectors. 

Certain other amendments have been made to other sensitive sectors already within scope of the NARs including Communications, Critical Suppliers to Government, Data Infrastructure, Energy and Suppliers to the Emergency Services.

Next Steps

The government plans to lay the necessary secondary legislation before Parliament later this year; until then, the current NARs remain effective. The government will also publish updated guidance for many sensitive sectors to accompany the changes. Importantly, the Government has not provided further information on exempting all insolvency practitioners from the NSIA regime, nor whether certain internal reorganisations will be exempted—both of which are key for businesses and investors active across the sensitive sectors.

We recommend that legal and compliance teams should begin reviewing their transaction pipelines and internal processes to ensure readiness for these changes when they come into force. In parallel, we recommend that legal and compliance teams ensure their NSIA readiness planning aligns with export-controls compliance processes, particularly in sectors such as semiconductors, critical minerals and AI, as well as other advanced technologies. A coordinated diligence framework will help operators identify at an early stage whether transactions raise NSIA and/or export‑controls issues.

Akin’s unique combined investment review and export controls capabilities and team offer seamless expertise across both areas, providing integrated advice in relation to transactions and investments.

^{1 As drafted, an “enabler” refers to anything that is not deemed a critical mineral within the schedule but is used in key activities related to obtaining or processing such critical minerals (e.g. R&D, processing, recycling and provision of know-how). For example, separation solvents used during the processing stage for certain critical minerals could be caught by the mandatory notification regime.}