UK industry closer to €150B EU defence fund in new pact

The European Union and the United Kingdom announced a new agreement on Monday that included the first steps towards allowing access for British defence industry to orders paid with funds for European rearmament.

European Commission President Ursula von der Leyen had proposed the ReArm Europe plan in March, of which a key component was a loan program for defence projects for an amount of €150 billion. The plan was renamed Readiness 2030 after criticism from Italian Prime Minister Giorgia Meloni and Spanish Prime Minister Pedro Sanchez who objected to the aggressive tone of the original name. The low-interest loan program meant to boost defence spending by member states was named Security Action for Europe (SAFE).

EU countries were also reported to have approved the SAFE loan program in principle on Monday. But the fund was also intended to favour orders to EU defence industry, potentially denying British defence companies opportunities to compete for these orders.

A statement from the office of British Prime Minister Kier Starmer said, ‘Today will also see the agreement of the new Security and Defence Partnership, which will pave the way for the UK defence industry to participate in the EU’s proposed new £150 billion Security Action for Europe (SAFE) defence fund – supporting thousands of British jobs and boosting growth. At a time of increasing global uncertainty and volatility, this will formalise UK-EU co-operation on defence to ensure Europe’s safety and security.’

According to the UK government, ‘This new agreement is set out in the Joint Statement; Common Understanding, and Security and Defence Partnerships.’

While acknowledging the possibility of British industry participation in servicing these orders, under the Common Understanding in Monday’s agreement, the EU and UK merely stated an ‘ambition to explore possibilities for mutually beneficial cooperation created by the EU’s €150bn Security Action for Europe (SAFE) instrument which, once adopted, in accordance with their respective legal frameworks,’ ‘could lead to a more resilient and competitive UK and EU industrial base.’

In her remarks, von der Leyen called the Common Understanding ‘basically the roadmap that we have agreed on to follow after this Summit,’ and said, “We have concluded our security and defence partnership. This will boost our cooperation in security and defence initiatives. There are lots of topics covered, for example, on the defence industry, but also military mobility, peace building, crisis management, or the countering of hybrid threats, just to name a few. And this is the first step towards UK participation in Europe’s defence investment programme. We call it SAFE. It is €150 billion of loans for joint procurement. This security and defence partnership opens the door towards the joint procurement. We need another second step, but this joint procurement we have discussed will increase our readiness, will close military gaps that we have and will increase – that is of most importance – our interoperability when our armed forces are going on missions together. It will create new opportunities, of course, for our defence industries and, as I said, enable stronger, more coordinated support also for Ukraine. That is important, either through joint procurement of military capabilities that then are brought to Ukraine or for direct investment in Ukraine’s defence industry.”