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Britain will have to pay the EU a percentage of the value of any weapons bought from UK companies via a Brussels-led defence fund, under plans being drawn up by the bloc to counter the growing threat from Russia.
Prime Minister Sir Keir Starmer in May said the UK would join the EU’s new €150bn Security Action for Europe (Safe) project to boost military spending across the continent, as part of a “reset” of bilateral relations.
Participating in Safe would provide “new opportunities for our defence industry, supporting British jobs and livelihoods”, Starmer said.
But London will be required to recompense Brussels for being allowed to take part in the EU-backed scheme aimed at procuring drones, missile defence systems and other capabilities, two EU diplomats told the Financial Times.
“What was written in the Safe regulation is that there shall be a fair balance as regards the contributions and the benefits” of outside countries such as the UK, said one of the diplomats.
The Safe fund is part of an effort by the bloc to mobilise €800bn in new defence spending by 2030, in the face of a growing threat from Russia and calls by US President Donald Trump for Europe to pay for more of its own security.
Launched in May, its loans will allow member states and designated “third countries”, such as the UK, to engage in joint procurement.
The scheme is designed to leverage the EU’s credit strength to increase overall defence spending while better unifying Europe’s armed forces, which are saddled by inefficient and duplicative procurement processes.
The exact figure that Britain will have to pay to access the fund is still under discussion by member states as they finalise their position on the deal with the UK, which is expected to be published this week.
But the diplomats said that since British businesses would receive EU money to create jobs and expand capacity under the scheme, London should recompense Brussels.
If UK companies won contracts funded by Safe money, the UK government must pay a percentage into the fund to help balance out the economic benefit of the contracts, the diplomat added.
The same mechanism would apply to Canada and any other countries that want their industry to access the money, they noted.
In order for UK defence products to qualify, the value of their components from members of Safe must be at least 65 per cent. Members include the EU, Ukraine, Iceland, Liechtenstein, Norway, Switzerland and any third countries that join.
Senior UK officials said France was driving a hard bargain in talks with other member states to agree an EU negotiating mandate this week. One described the situation as “tricky”.
Mujtaba Rahman, managing director for Europe at the Eurasia Group consultancy, said both London and Brussels needed to keep the big picture in mind.
“It is really important that both sides don’t allow parochial national interests to get in the way of the bigger prize, which is strengthening collective European defence in light of the threat posed by Putin’s Russia,” he said.
France, which views Safe as a way to expand the EU arms industry, is pushing for a high UK contribution. But other countries, led by Germany, want to ensure the UK is not dissuaded from joining, a third diplomat said.
Under the EU’s terms, countries must bid for the loans by July 29, with a maximum pot of €150bn. They would then join another Safe member to buy weapons, aiming to lower prices by pooling demand. The UK would have to use national money to join such projects.
Third countries — other than those included by default, such as Ukraine — must first sign a security and defence partnership with the EU, and then a specific agreement to join Safe.
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Britain signed the first of these at the reset summit in London in May, and will negotiate the second once the EU has agreed its mandate.
Time is tight because projects must be submitted by the end of November, with the European Commission, the EU’s executive, deciding which to approve.
Thomas Regnier, commission defence spokesperson, said the EU-UK accord in May meant UK-based entities could provide up to 35 per cent of the value of a defence product procured through Safe.
To obtain a bigger share would require “an agreement with the EU on the precise modalities on aspects such as budget contribution and security of supply”, he added.
The UK cabinet office said it would not pre-empt future discussions with the EU.
“It is in all our interests for the UK and EU to bring together our unique capabilities and expertise to make Europe a safer, more secure, and more prosperous place,” it added.
