Talks aimed at securing greater access for UK defence companies to the EU’s €150bn (£130bn) military loans scheme have collapsed after the two sides failed to agree on a financial contribution.
The breakdown in negotiations leaves British firms facing strict limits on the value of weapons, components and equipment they can supply to EU-funded defence projects.
For weeks, officials had been negotiating a fee that would allow UK manufacturers to take a larger share of long-duration loans issued under the EU’s Security Action for Europe (SAFE) initiative. The deadline for EU member states to submit initial bids for the funding falls on Sunday, with loans expected to be issued next year.
Reports suggested the EU had been pushing for an entry fee worth several billion euros in return for enhanced access. While the UK accepted that a financial contribution was appropriate, negotiators made clear they would not agree to any deal that did not represent value for money.
In a statement issued on Friday, Nick Thomas-Symonds, the minister responsible for EU relations, said it was “disappointing that we have not been able to conclude discussions” on UK participation in the first round of bids. He added: “Negotiations were carried out in good faith, but our position was always clear: we will only sign agreements that are in the national interest and provide value for money.”
A European Commission spokesperson said that despite intensive efforts, an agreement could not be reached “at this time”, adding that “throughout these intense negotiations, our negotiators have engaged constructively and in good faith with the UK to get a deal over the line.”
Under a defence pact agreed with the EU in May, British companies can already contribute to EU-funded defence projects. However, without a new agreement, UK firms supplying parts or subsystems will be capped at providing no more than 35% of the final product’s overall value.
The UK had hoped to secure an enhanced arrangement before Sunday’s deadline so that domestic companies could compete more fully in the first round of applications. Nineteen of the EU’s 27 member states have so far applied for SAFE loans, which will finance the purchase of ammunition, artillery and military drones in joint procurement programmes.
The SAFE scheme, announced in March, forms a central part of the EU’s wider rearmament effort following Russia’s full-scale invasion of Ukraine. The European Commission plans to borrow up to €150bn to provide long-term loans to member states, encouraging them to buy equipment collectively and strengthen the bloc’s defence industrial base.
Preliminary allocations show Poland receiving the largest share of funds at €43.7bn, followed by Romania on €16.6bn, with both Hungary and France allocated €16.2bn each.
Canada is also in discussions with Brussels, and the Commission has said it hopes to reach an agreement with Ottawa before the Sunday deadline.
