EU to require UK financial contribution for joining new defense fund

The United Kingdom will be required to repay a percentage of the value of weapons purchased from British companies through a new EU-led defense fund it plans to join.

In May, Prime Minister Keir Starmer announced that as part of a “reset” of bilateral relations between the United Kingdom and the EU, the UK would join Brussels’ new €150 billion European Security Action (SAFE) project.

Starmer stated that participation in SAFE “will support British jobs and livelihoods by providing new opportunities for our defense industry.”

However, two EU diplomats told the Financial Times (FT) that London would have to pay a fee to Brussels in return for permission to join the EU-backed program, which aims to procure drones, missile defense systems, and other capabilities.

One of the diplomats said that the SAFE regulation states, “there must be a fair balance between the contributions and benefits of external countries like the UK.”

SAFE is part of an effort to mobilize €800 billion in new defense spending by 2030, in response to the alleged “growing threat from Russia” and calls from US President Donald Trump for Europe to pay more for its own security.

The program, launched in May, will allow member states and designated “third countries” like the United Kingdom to participate in joint procurement.

The program aims to increase overall defense spending using the EU’s credit power while more efficiently integrating European armed forces, which have struggled with inefficient and duplicative procurement processes.

The exact amount the United Kingdom will have to pay to access the fund is still being debated by member states, who are expected to finalize their position on the agreement with London this week.

The diplomats added that if British companies win contracts financed by the SAFE fund, the British government would have to pay a certain percentage to the fund to balance the economic benefit of the contracts.

They noted that the same mechanism would apply to Canada and other countries seeking access to the funds.

For British defense products to benefit from these funds, at least 65% of the value of their components must be sourced from SAFE members. Members include the EU, Ukraine, Iceland, Liechtenstein, Norway, Switzerland, and other third countries that will join.

Senior British officials said that France has been engaged in tough negotiations with other member states this week regarding the EU’s negotiating mandate. One official described the situation as “difficult.”

France, which sees SAFE as a way to expand the EU’s arms industry, is pushing for the United Kingdom to make a high contribution. However, other countries, led by Germany, want to ensure that the UK is not deterred from participating.

According to the EU’s terms, countries must submit bids for loans of up to €150 billion by July 29. They will then join another SAFE member to purchase weapons, aiming to lower prices by consolidating demand. The UK will have to use its national resources to participate in such projects.

Third countries, other than those included “by default” like Ukraine, must first sign a security and defense partnership with the EU and then a specific agreement to join SAFE.

The United Kingdom signed the first of these at a restart summit in London in May and will negotiate the second after the EU approves its mandate.

Time is running out, as projects must be submitted by the end of November, and the European Commission, the EU’s executive body, must decide which ones to approve.

Commission defense spokesperson Thomas Regnier said the EU-UK agreement signed in May means that UK-based entities can provide up to 35% of the value of defense products procured through SAFE.

He added that to obtain a larger share, “an agreement must be reached with the EU on the precise terms regarding issues such as budget contribution and security of supply.”

The UK Cabinet Office stated that this would not pre-empt future negotiations with the EU.

The office added, “It is in all our interests for the United Kingdom and the EU to bring together our unique capabilities and expertise to make Europe a safer, more secure, and more prosperous place.”