UK talks to join EU defence fund stalled over participation fee

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The UK faces gruelling talks with the EU over the fee for participating in a €150bn defence procurement fund as it races to meet a November deadline to join.

Nick Thomas-Symonds, the UK’s EU relations minister, said on Wednesday that an agreement to participate in the Security Action for Europe (Safe) project was “urgent” after four months of delay by Brussels.

“We have the first round with the biggest projects coming up in November,” he told a conference in Brussels. “And I make that point, not only because there is that particular process, but because of the urgency of the situation . . . in Ukraine. Ukraine doesn’t have much time to waste.”

Safe aims to boost EU defence production so it can send arms to Ukraine and deter Russia from further aggression, and will procure drones and missile defence systems among other capabilities.

To lower funding costs for defence projects, EU members can borrow backed by the EU budget and can team up with each other or designated “third countries”, such as the UK. Governments hope to improve the efficiency of these projects by combining spending power. 

As well as EU states, members include Ukraine, Iceland, Liechtenstein, Norway and Switzerland while Canada is also in talks to join. Non-EU members must fund projects from their own budgets.

EU envoys only agreed their negotiating stance on Wednesday, despite a summit in May announcing the Safe talks as part of a wide-ranging “reset” of relations with the UK five years after it left the bloc.

Two EU diplomats told the FT that the UK would have to pay into the fund in proportion to the orders its defence industry receives. 

“It is a balance of rights and responsibilities,” said one. “The higher the share that goes to UK industry, the higher the UK contribution.

“This is an instrument to develop the European defence industry.”

France has asked that no more than 50 per cent of the value of any procurement from the Safe fund be British, the diplomats said.

But European Commission negotiators have flexibility, with the ability to go higher if the UK is prepared to pay more for the benefit of the contracts to its industry.

The first deadline for joint projects is the end of November. If the UK is not a member of Safe by then it would miss out on the first round of procurements, though members could still spend up to 35 per cent of their budget on British kit.

EU member states and the European parliament have to approve the UK’s entry into Safe.

UK officials stress it would only join the scheme if it represented value for money and was in the national interest.

British equipment is increasingly sought after as countries look for alternatives to US kit. Norway recently signed a deal for British warships and Denmark and Sweden are in advanced talks with London.

Thomas-Symonds said he believed a quick deal on Safe was possible. “I think there’s a real shared sense of solidarity in defence across Europe.”

But Rebecca Christie, senior fellow at Bruegel, the Brussels based think-tank, warned that the EU had higher priorities than “fixing up relations with Britain”.

“The UK needs to work harder if it wants Brussels to take its concerns more seriously. 

“Defence is the UK’s best hope for a serious new collaboration with the EU. To make it work, the UK should be more proactive, and quickly offer Brussels a fair fee for joining the EU’s new joint procurement scheme so that British firms can be eligible for a greater share of contracts.”

A commission spokesperson said: “The UK is an essential partner and ally for the EU, with whom the EU signed a Security and Defence Partnership in May.

“The commission will now engage with the UK to associate them to Safe. The EU and the UK will always be stronger together.”