UK-EU defence fund talks collapse: A missed opportunity

When the UK and EU announced a defence reset in May, it felt like a genuine turning point. Britain was negotiating to join the EU's new €150bn  Security Action for Europe (SAFE) defence fund – a chance to supercharge UK industry and bolster Europe's security together.

May’s optimism turns to disappointment

Fast-forward to this week: those hopes were dashed when the UK government announced that talks to join SAFE had broken down. It’s a deeply disappointing outcome, turning what looked like a promising reset into another false dawn for UK–EU defence cooperation.

EU protectionism over partnership

Why did the talks collapse? In a word: protectionism. Under SAFE’s current rules, non-EU partners are severely limited – no more than 35% of any funded defence contract’s value can come from outside the EU (or outside fully associated countries).

That means without a special deal, UK firms can never supply more than about a third of components to any project - hardly a level playing field. EU negotiators (pressed by some member states) offered to raise this cap to 50%, but only if Britain paid billions of euros as an “entry fee”. From the UK’s government’s perspective, the terms on the table were not in our national interest and did not provide value for money.

It’s hard not to see the EU’s stance here as inward-looking. France, for example, pushed to hard-code a 50% ceiling on UK parts in EU-funded projects, framing it as a matter of “European sovereignty” in defence production. The rationale was clear: after Brexit, Paris didn’t want UK firms freely benefiting from an EU fund without conditions. While safeguarding Europe’s own industrial base is understandable to a point, outright protectionism does not best serve Europe's security.

Other allies in Europe had argued for more flexibility – to source the best kit across allied supply chains – but ultimately the more restrictive line prevailed. The result is a deal that never happened, because the UK understandably refused to be a second-tier participant at a high cost.

A frustrating setback for industry

For Britain’s defence industry, this is a major missed opportunity. By walking away, the UK loses the chance to fully access a €150 billion investment pipeline aimed at developing new military capabilities across Europe – from drones and missiles to a continental air defence shield. UK companies, some of the most advanced in Europe, now can’t lead or significantly shape these EU-funded projects.

They’ll be stuck on the sidelines or confined to that 35% subcontractor role if they join consortia at all. The UK can of course pursue its own programs or work through NATO and bilateral deals, but we forfeit the economies of scale and innovation that an integrated European effort could offer.

Some of the missed opportunities include:

1. Funding and scale

UK firms will miss out on direct access to the EU’s massive rearmament fund, which would have catalysed R&D and production on a scale difficult to achieve alone. Instead of tapping into collective financing, UK projects must rely solely on national budgets or smaller partnerships.

2. Leadership in Pan-European programs

We’ve lost the chance to lead consortia on next-generation European defence projects. Whether it’s cutting-edge drone swarms, cyber defence tools, or the planned European air missile shield, UK expertise now can’t be fully leveraged in EU programs. That means less influence on design and requirements – and possibly duplicated efforts as the UK pursues parallel initiatives outside the EU framework.

3. Supply chain integration

Closer integration of UK-EU defence supply chains could have boosted efficiency, interoperability and innovation across allied industries. With SAFE excluding full UK participation, our companies and those in Europe won’t collaborate as closely on procurement, which could slow down capability development and keep costs higher due to fragmented production lines.

4. Strategic alignment

Perhaps most importantly, this was a chance to demonstrate unity against common threats. A joined approach to European defence investment would send a powerful message of cohesion. Losing that puts a dent in the broader UK-EU strategic alignment we’ve been trying to rebuild.

The collapse of the SAFE talks is a blow not just to UK industry, but to the ideal of a more integrated European defence effort. It’s a setback that will be felt on both sides of the Channel.

Collaboration matters now more than ever

The timing of this breakdown couldn’t be worse. Europe faces the most serious security environment in decades – from Russia’s war in Ukraine to evolving threats in cyber and space. No single country can tackle these alone. This was exactly the time to tear down barriers between allied defence industries, not put up new walls. By working together, the UK and EU allies could strengthen NATO, spur innovation, and ensure our troops have the best equipment faster. Instead, bureaucratic inflexibility and zero-sum thinking prevailed, at least for now.

What makes this outcome so frustrating is that UK-EU cooperation in defence should be a no-brainer. The UK is one of Europe’s leading defence powers - a top-tier spender with world-class industry. The EU, for its part, is trying to build up a more capable European pillar for transatlantic security. These goals are complementary, not at odds. Yet, by keeping the UK at arm’s length through SAFE, the EU is effectively saying political considerations outweigh practical joint benefits. It’s a short-sighted approach that ultimately weakens Europe’s collective capacity.

Of course, it’s not all doom and gloom. The breakdown only affects this particular funding mechanism’s first round - UK firms can still contribute to projects on a limited basis as “third-country” suppliers, and other UK–EU defence collaborations will continue. The broader security partnership signed in May covers things like military mobility, joint exercises, and countering hybrid threats, which remain on track.

The European Commission has also hinted that the door isn’t permanently closed - talks might resume in future if a better compromise can be found. I sincerely hope so. This setback, frustrating as it is, should not derail the overall momentum of closer UK-EU cooperation.

Moving forward

Allied unity is too important to let funding formulas and caps get in the way. The UK government was right to stand firm for a fair deal - UK industry shouldn’t be a junior partner in Europe’s defence, especially not when we bring so much to the table. At the same time, the EU’s goals of strengthening its defence industry need not exclude its closest neighbours. We can find a balance that safeguards European industrial interests while embracing the UK as an equal collaborator.

In the coming months, let’s not allow this disappointment to turn into disengagement. Instead, the UK and EU should redouble efforts to find creative solutions - maybe a phased approach, a more proportionate fee, or specific project-based partnerships - to bring Britain fully on board in the next SAFE rounds.

Collaboration, not protectionism, is what will ultimately make us all safer. In an era of global instability, partnership is the real force multiplier.

Conclusion

Common sense and strategic necessity must prevail. The UK and Europe are strongest when we stand together, and our defence industries thrive best when they innovate and build together. This chapter didn’t end how we wanted, but the story of UK-EU defence cooperation is far from over.

We owe it to our security and our industries to get this partnership back on track in the near future.