Government faces test as Chinese buyers line up for major UK energy grid

The government's approach to foreign investment could be tested this month as Chinese buyers line up for a major UK energy network.

State-owned operators State Grid Corporation of China and China Southern Power Grid are looking at Electricity North West, which is expected to fetch £2bn at auction, the Sunday Times reported.

It has also attracted interest from Hong Kong billionaire Li Ka-shing and Spanish Iberdrola.

The deal will mark a major test of Theresa May’s investment policy, and comes as heat piles on telecoms maker Huawei over fears Chinese officials could use its equipment to spy.

Electricity North West supplies around 5m customers in vital cities such as Manchester. It has been put up for sale by owners JP Morgan and Australian Colonial First State.

In one of her first moves as Prime Minister in 2016, Theresa May paused the development of the Hinkley Point nuclear power plant by French firm EDF, which had Chinese backing.

It was finally approved, but not before the government said it would be more cautious in future.

Last year the government proposed new laws which would let ministers block takeovers that threaten national security.

The plans would allow the business secretary to review all deals, no matter of size or sector.

Currently, the government can only weigh in if the takeover creates a player with 25 per cent of the market, or which turns over above £70m.

The Department for Business, Energy and Industrial Strategy has said it expects to investigate fifty deals a year under the new system, up from just one in 2017.