Britain to examine whether some outward investment undermines national security

LONDON (Reuters) - Britain will review its controls on outward investment and exports to protect its economic security, Prime Minister Rishi Sunak's deputy said, warning of the global economy's vulnerabilities to actions of players like Russia and China.

Deputy Prime Minister Oliver Dowden said that globalisation had exposed the security risks of economic integration, citing the rise in the price of gas spurred by Russia's invasion of Ukraine, and "Chinese acts of economic coercion."

"Our open economy is being targeted by state-based actors and their proxies, across our inbound and outbound investment flows, our imports and exports and our academic collaborations," Dowden said in a speech at the Chatham House think tank in London.

"The whole spectrum of our economic security interests is under threat, and the nature of these threats is evolving."

Dowden said a small proportion of outbound investments might cause national security issues, saying "they might be fuelling technological advances that enhance military and intelligence capabilities of countries of concern."

As such, the government will launch a review team to look into risks from outward direct investment, and also launch a consultation on improving export controls on emerging technologies.

Britain has introduced a National Security and Investment Act, which it has used to intervene in takeovers of British companies, especially by Chinese companies.

The government said the system would be fine-tuned in order to keep it as pro-business as possible, with some targeted exemptions, but also maintain national security priorities by likely expanding its scope to cover critical minerals and semiconductors.

Dowden said that Britain would not decouple from the global economy and would "continue to default to openness".

"So while we won't decouple, we must de-risk and our rules must constantly adapt," he said.

(Reporting by Alistair Smout; Editing by Tomasz Janowski)