By Andrew MacAskill and Ben Martin

LONDON, July 23 (Reuters) – Britain is planning to create
new powers to block or unwind foreign takeovers amid concerns
that investment in certain sectors of the economy such as
defence and technology could compromise national security.

The decision to tighten the screening of foreign investment
rules marks a further shift in policy for the world’s
fifth-largest economy which has traditionally been one of the
most open markets to global mergers and acquisitions.

Britain is pressing ahead with the changes in parallel with
similar efforts in other western economies such as Germany and
Australia amid growing levels of Chinese investment.

Under the new rules, the government will broaden its power
to investigate deals regardless of the size of the companies’
revenue or market share and have the right to scrutinise any
transaction in any sector of the economy.

The government will also have the power to intervene when a
company wants to acquire an asset such as a particular piece of
technology or intellectual property rather just when they are
seeking to buy or take control of a firm.

At present the government can only intervene if a deal
creates a group with 25 percent of the market or with turnover
of over 70 million pounds ($91.72 million). That has already
been reduced to 1 million pounds for companies that make
technology with military or dual-use applications.

The Department for Business, Energy and Industrial Strategy
expects the changes will mean the government will investigate
around 50 deals on national security grounds each year, up from
one this year so far and one last year.

Earlier this month, the government approved the planned sale
of Northern Aerospace to Chinese-owned Gardner Aerospace
Holdings Ltd. after investigating the impact on national

Last year, the government also approved the sale of Sepura,
which makes walkie-talkies for London’s police, to China’s
Hytera Communications after a similar probe.

Prime Minister Theresa May has taken a more cautious
approach towards deals in the UK since becoming prime minister
in 2016, a shift that has coincided with a global boom in
takeovers this year.

One of May’s first actions as prime minister in July 2016
was to pause the multibillion-pound Hinkley Point nuclear power
plant project, which is being built by French state-controlled
utility EDF and which China is helping to finance.

She ultimately approved the deal but said her government
would take a more cautious approach over similar foreign
investments in the future.

The change in rules, which will be subject to consultation,
comes at a time when the government is trying to demonstrate a
more positive approach to foreign direct investment as it
prepares to negotiate a new post-Brexit trade deals.
($1 = 0.7632 pounds)
(Editing by David Evans)