The UK government has called for a security review into the planned takeover of Perpetuus Group – a small loss-making Welsh company specialising in advanced materials – by a newly registered company and Chinese nanotechnology expert.

The business secretary, Kwasi Kwarteng, has told the Competition and Markets Authority (CMA) to investigate the planned acquisition of Pepetuus Group by an academic and a company called Taurus International.

Kwarteng said he had issued the public intervention notice “on the public interest ground of national security”. The department has concerns about the implications of the takeover because while Perpetuus has just 14 employees and reported a turnover of £479,000 in the year to March 2020, it supplies “at least one-quarter” of all graphene plasma goods in the UK. Kwarteng has said that foreign investment in the UK “must not threaten national security”.

Perpetuus is working on applications for graphene, which has been frequently described as a wonder material thanks to its superlative properties. It says it has used its technology to strengthen bicycle and car tyres and it is developing “graphene-enabled” batteries and a method for producing surface-modified graphene in a fraction of the time of previous approaches. The company appears to be making significant losses, at present.

Taurus International was registered in London in October 2020. Its website lists Dr Victor Gembala as its sole shareholder and Chinese academic Dr Zhongfu Zhou as its chief nanotechnology scientist. The precise nature of the relationship between Zhou, who had a contract with Aberystwyth University’s physics department which ended last year, and the two companies is unclear. However, CMA has been instructed to investigate the involvement of Zhou “or any enterprise associated with him or the company” in the takeover. Little is known about the terms of the acquisition.

The CMA has until February 2022 to report its findings.

Recently, the prime minister Boris Johnson asked for an investigation into the proposed acquisition of another Welsh tech company, Newport Wafer Fab, by Chinese-backed Nexperia. Newport Wafer Fab is the UK’s largest chipmaker, making it a strategically important asset, particularly in the context of the ongoing worldwide semiconductor shortage. The government has also promised to investigate proposed acquisitions of British defence firms Ultra Electronics and Meggitt by US companies.

Following a preliminary investigation, the CMA has warned of the impact of Nvidia’s purchase of majority control of Cambridge-based Arm Holdings from SoftBank. It said that the proposed acquisition raises serious competition concerns across a number of markets including data centres, gaming and autonomous vehicles and has recommended an in-depth investigation.

Data from the Office for National Statistics shows that takeovers of UK companies by new foreign owners spiked between April and June, led by increased interest from North America. Inward mergers and acquisitions exploded from £8.3bn in the first quarter of 2021 to £27.7bn in the second, reaching their highest point since the end of 2018 when Comcast’s £30bn takeover of Sky pushed the fourth quarter’s total to £33.3bn.

By comparison, inward mergers and acquisitions reached just £35.3bn in the whole of 2017, which was higher than at any point between 2011 and 2015.