The United Kingdom government is preparing to narrow the official definition of the artificial intelligence sector within its national security investment screening regime, in a move aimed at reducing regulatory burdens while maintaining oversight of strategically sensitive technologies.

Under proposed reforms to the National Security and Investment Act regime, commercially available or “off-the-shelf” artificial intelligence systems would be removed from the list of activities that automatically trigger mandatory government notification when companies are acquired or investment takes place.

The change is intended to ensure that only genuinely sensitive AI technologies remain subject to compulsory scrutiny.

The National Security and Investment Act, introduced in two thousand twenty one, grants ministers the authority to review, impose conditions on, or block acquisitions involving sectors considered vital to national security.

Transactions involving companies operating in designated sensitive industries must currently be reported to the government before they can proceed.

Officials say the revised definition of artificial intelligence would concentrate regulatory oversight on advanced or proprietary AI systems that are developed or significantly modified for specialised purposes.

These technologies, which may have strategic or security implications, would continue to fall within the scope of mandatory screening.

By contrast, widely available AI software and standard commercial tools would be excluded from the automatic notification requirement.

Policymakers argue that this adjustment reflects the rapid diffusion of AI technologies across the broader economy and aims to prevent routine commercial transactions from being unnecessarily delayed by security reviews.

The proposal forms part of a broader set of reforms designed to modernise the investment screening regime and make it more proportionate to the risks involved.

The government has also signalled plans to introduce clearer definitions across several sectors and to add new areas of strategic interest where national infrastructure could be vulnerable.

Among the changes under consideration is the potential inclusion of the water sector in the list of industries requiring mandatory notification for acquisitions.

Officials argue that water utilities represent critical national infrastructure whose ownership and control can have direct implications for security and public resilience.

The consultation on the revised rules followed a review of the system’s operation since the legislation took effect.

Data from the most recent reporting period shows a steady rise in the number of transactions submitted for screening, with more than a thousand notifications received in a single year.

The vast majority of these deals were cleared quickly, reflecting the government’s effort to balance security oversight with maintaining an open environment for investment.

The updated framework is expected to be implemented through secondary legislation after the consultation process concludes.

Ministers say the objective is to ensure the system remains effective in protecting national security while giving investors and businesses clearer guidance as technologies such as artificial intelligence continue to evolve rapidly.