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UPDATE 1-Britain proposes tougher M&A rules to protect national security

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LONDON, Oct 17 (Reuters) - Britain wants more say over deals in its military and technology sectors, as the government tries to prevent homegrown companies in sensitive industries from falling into foreign hands.

The proposals, announced on Tuesday as part of a broader consultation on potential changes to takeover rules, mark a shift for a country which has traditionally been one of the most open to foreign buyout deals.

That emphasis has changed, with a string of acquisitions by Chinese companies across the world fuelling security concerns in countries including Germany and the United States. The weakening of the pound since Britain's vote to leave the European Union has also made UK companies cheaper for foreign buyers.

In September, Canyon Bridge Capital Partners - a China-backed buyout fund that was barred a week earlier by U.S. President Donald Trump from buying a U.S. chipmaker - agreed to buy British chip designer Imagination Technologies for 550 million pounds ($729 million), sparking criticism from some politicians and media of the UK's relaxed rules..

"Britain has and always has had a proud record of being open to the world as the foremost advocate of free trade," Business and Energy Secretary Greg Clark said in a statement on Tuesday.

"It is right that every so often the government reviews its mergers regime to close loopholes where they arise and this is what these proposals do in the area of national security."

The proposals include lowering the turnover threshold at which the government can scrutinise deals to companies with annual revenues of at least 1 million pounds ($1.3 million), from 70 million previously.

The proposed changes would apply to companies in the military sector and those involved in the design of computer chips and quantum technology.

BUYOUT BRITAIN

The worlds fifth-largest economy is trying to balance the need to remain open for investment after the Brexit vote sparked fears it could become less attractive for business, while upholding a pledge by Prime Minister Theresa May to intervene when big foreign investments concern critical assets.

Since the Brexit vote in June 2016, Britain has remained a busy market for mergers and acquisitions, with the value of deals up 26 percent so far this year to $125 billion, Thomson Reuters data shows.

The government also said it would open a twelve-week consultation period on longer-term reform proposals, including an expanded version of the "call in" power that allows government to scrutinise a broader range of transactions for national security concerns within a voluntary notification regime and a mandatory notification regime.

May, who became prime minister after the Brexit vote, faced one of her first major challenges when she gave the go-ahead for a $24 billion plan for a Chinese-backed nuclear power plant in southwest England.

In July 2016, Japan's SoftBank agreed to buy Britains most valuable technology company, ARM, for $32 billion in cash.

($1 = 0.7548 pounds) (Reporting by Anjuli Davies; Editing by Rachel Armstrong and Mark Potter)