US officials have threatened to limit defense co-operation with Britain in connection with the acquisition of a secret technology supplier for nuclear submarines.
Intelligence sources said Quasi Quarteng, the business secretary, would jeopardize future partnerships if he blocked the sale of Ultra Electronics for £ 2.6 billion to Boston-based private equity Advent International.
They accused Mr Kwarteng of unfair discrimination against US companies after he ordered a national security investigation into the takeover of Ultra, which makes military communications equipment, including the highly classified Trident nuclear submarine kit.
The Americans added that Congress had recently lifted restrictions on British companies such as BAE Systems and Rolls Royce, allowing them to operate more freely across the Atlantic.
A senior US Congressional intelligence source said: “At a time when allies such as the United States and the United Kingdom are seeking to deepen defense cooperation, we must remove obstacles, not create them.
“Congress has already taken action to ease some of the restrictions on British defense companies operating in the United States. But instead of taking such an approach, it seems the British government is determined to impose unnecessary obstacles that are hampering US defense companies in the UK.
Mr Quarteng told the Competition and Markets Authority (CMA) to investigate the takeover last August.
He received an initial report on the deal and agreed to further talks with Advent last month to try to find a compromise so he could continue.
If these discussions fail, the business secretary is likely to order the CMA to conduct a thorough “Phase 2” review, which could eventually lead to a takeover.
Britain and the United States are committed to deepening defense cooperation to counter the threat of hostile forces such as Russia and China.
Last year, the United States signed a tripartite security pact with Britain and Australia, known as Aukus, to work together to build a new generation of nuclear-powered submarines.
Negotiations are currently under way to extend the agreement to include other military research projects, such as the development of hypersonic missiles.
U.S. officials say the British government is abusing powers introduced in January to limit the ability of hostile forces such as China to acquire companies linked to British security institutions.
They say these powers should not apply to close allies such as the United States, as Britain and the United States already have intelligence-sharing agreements within the Five Eyes alliance.
There is also close cooperation between the two countries to maintain Britain’s nuclear deterrence.
A senior US official said: “We do not differentiate between a British investor in an American company for reasons of national security.
“It is not fair for the British government to treat American companies this way.
U.S. officials fear that any further delay could eventually ruin Ultra’s takeover.
Officials from the Ministry of Business, Energy and Industrial Strategy said the deal could still be approved as long as Advent is ready to make commitments to allay national security concerns.
An Ultra spokesman said she was working with the British authorities to prepare “appropriate commitments to protect the UK’s national security interests”.
Add Comment