Sir Keir Starmer’s Brexit reset suffered a major blow on Friday after negotiations for the UK to join a flagship EU defence fund collapsed over Brussels’ cash demands.
UK minister for EU relations Nick Thomas-Symonds said it was “disappointing” the two sides had failed to agree a deal for the UK to join the EU’s Security Action for Europe (Safe) €150bn (£132bn) rearmament fund ahead of Sunday’s deadline for project bids.
The scheme is intended to use low-interest loans to boost Europe’s arms production capacity and reduce reliance on US supplies in response to the growing threat from Russia and Donald Trump’s withdrawal from the continent.
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But, the negotiations came unstuck over EU demands for the UK to pay billions to participate, despite Brussels lowering initial demand for up to €6.5bn to €2bn to “pay to play”.
The i Paper reported on Thursday that the UK submitted a counter-offer which envisaged a pay-per-project scheme, with contributions calculated as a proportion of the value of each loan project the British defence industry was participating in.
France has taken a tougher line on UK
But the gap between the two sides proved impossible to bridge amid long-running EU splits over how important British involvement was.
France has long been said to be taking a tougher line, with Germany keener on closer ties with the UK.
Experts said this division could yet scupper negotiations in other areas of the reset including a youth mobility deal, a food and drink deal and energy cooperation, although Thomas-Symonds insisted “strong progress” was being made in these areas.
The i Paper on Thursday reported that the EU was continuing to demand a waiving of international fees in a youth mobility deal, though they were also discussing a potential compromise option amid UK resistance.
Food and drink deal clash expected
The two sides are also expected to clash over the food and drink deal, which will see the UK align with Brussels rules in this area to ease trade, as the British Government seeks exemptions from EU law in a number of areas.
The failure of Safe negotiations is a blow to the Prime Minister after he signed a security pact with the EU at May’s Brexit reset summit, which he said would “open the door” to joining Safe, “providing new opportunities for our defence industry, supporting British jobs and livelihoods”.
At the London event, European Commission President Ursula von der Leyen said a deal could be reached on Safe “within weeks”.
A Commission spokesman on Friday said British companies could still benefit from a 35 per cent share in projects funded by Safe, but the UK was pushing for 50 per cent.
Thomas-Symonds said: “While it is disappointing that we have not been able to conclude discussions on UK participation in the first round of Safe, the UK defence industry will still be able to participate in projects through Safe on third country terms.
“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.
“We continue to make strong progress on the historic UK-EU May agreement that supports jobs, bills and borders. In the last fortnight, we have launched negotiations on a food and drink deal and energy deal that will bring down bills and slash red tape for business.”