European countries will introduce tough new laws to prevent foreign investors from countries such as China from buying companies weakened by the pandemic at knock-down prices.
Both Britain and Sweden are proposing legislation that will outlaw companies crucial to national infrastructure or with sensitive security technology from being sold to foreign investors.
The British Prime Minister, Boris Johnson, is to announce laws that will force companies to report potential takeovers that could compromise national security, the Times has reported.
Similarly, Sweden has said it will tighten rules to enable its government to block takeovers of important firms by foreign companies amid increasing concerns over the threat to national security from Chinese and Russian takeovers, Reuters reported.
Conservative MPs are worried that Britain has some of the weakest protections against foreign takeovers. China, which has not been as economically damaged by coronavirus as many European countries, could use its wealth to purchase sophisticated Western firms to exploit their advances.
Chinese financiers have already attempted to take control of one of Britain’s biggest software companies, Imagination Technologies, in Hertfordshire.
Under new laws, businesses will have to announce if a foreign company has bid for more than one quarter of their shares, bought intellectual property or acquired significant influence.
The proposed British legislation will make it a criminal offence to ignore the new rules with company directors facing jail or large fines. Previously it has been only voluntary to notify the government of a takeover bid.
With rising tensions between Britain and China over human rights in Hong Kong and from the Chinese firm Huawei’s contract for the 5G network, the new laws are likely to strain diplomatic relations further.
It will not be helped by Mr Johnson’s call for “academic partnerships” and research projects to be included under the rules over worries that research advances are going back to China, with thousands of Chinese students attending leading British universities.
Conservative MPs have called China’s relationship with Imperial College London “deeply worrying” after the leading university agreed to a £5 million deal with Huawei, including a new “tech hub”.
In recent years a number of sophisticated Swedish technological companies, involved with sensitive defence and security information, have been bought by Chinese companies before the government could block the sales.
“Sweden will continue to be a country that is very attractive for foreign investors,” Home Affairs Minister Mikael Damberg told Reuters. “But there are areas where we see a need to protect businesses in Sweden.” He said the government hoped to put forward a bill to give it greater powers to stop takeovers after the summer.