EU defence fund

The UK will have to make a financial contribution if it wants its defence companies to benefit from the European Union’s new €150bn weapons procurement fund, diplomats in Brussels have confirmed.

As London and Brussels prepare to sign a broad defence and security pact at a summit on 19 May, officials have clarified that a second, more detailed agreement will be necessary to allow British firms such as BAE Systems to bid for contracts under the Security Action for Europe (Safe) fund.

‘Financial Contribution’

“The pact is a nonbinding instrument,” said one EU diplomat involved in the negotiations. “The more difficult hurdle is going to be a bilateral agreement that would include a financial contribution.”

The Safe Fund, proposed by the European Commission, is intended to boost collective European defence spending in the wake of Russia’s invasion of Ukraine and growing uncertainty about long-term US security commitments to Europe. It will offer cheap loans to EU governments for the purchase of military equipment, potentially including purchases from third countries that have negotiated access agreements.

Draft terms require non-EU nations to negotiate additional arrangements with the Commission, ensuring that only those willing to meet specific conditions, including financial ones, can access the fund.

‘French will try to Complicate it for the Brits’

“To get your industry in the game, you need a second agreement,” another EU diplomat said, noting that negotiations would focus heavily on market access for specific weapons systems. “Of course, the French will try to complicate it for the Brits,” they added.

A third diplomat confirmed: “The actual effective association with the programme requires a specific arrangement. We need to discuss the rules, what contribution and so on.”

Senior Commission officials have suggested that the fee could range from a modest administrative charge to a larger financial commitment, although precise details remain under discussion.

Other countries with existing EU defence pacts, including South Korea and Japan, must negotiate similar agreements for their industries. Meanwhile, firms from Ukraine and European Free Trade Association (EFTA) countries, such as Norway and Switzerland, which pay for access to the EU single market, will enjoy automatic access.

Commission President Ursula von der Leyen, during a meeting with UK Prime Minister Sir Keir Starmer, indicated that the upcoming defence pact could “pave the way” for UK participation in Safe, but stressed that the pact alone was insufficient.

Downing Street has yet to comment publicly on the issue.

Under the proposed regulations, the bilateral agreements must ensure a “fair balance” between contributions and benefits and commit participants to greater standardisation and interoperability with EU member states.

Diplomats expect internal EU negotiations on Safe to conclude by next month, with final approval required from the European Parliament. However, there is no guarantee that the full €150bn fund will be utilised. Countries must apply for funding within six months of the fund’s launch, presenting concrete, collaborative projects for Commission approval.

The development underscores the complexities of post-Brexit UK-EU defence cooperation, as London seeks to maintain influence in European security while navigating the political and financial costs of third-country status.