UK in EU Defence Loans Talks: British Firms Eye Deals

Reference picture courtesy of Defense News

The UK is gearing up for negotiations over British firms' participation in EU-funded military projects. The talks focusing on the ability of UK-based companies to contribute to initiatives financed by EU defence loans, with an agreement hoped to be reached in the next few weeks.

This move comes as the European Commission plans to provide substantial loans to EU nations to bolster their joint defence capabilities. Announced as part of the Security Action for Europe (SAFE) scheme in March, this initiative aims to fund collaborative defence contracts, as the EU seeks to strengthen its security following Russia's invasion of Ukraine. The Commission anticipates borrowing up to €150 billion (£130 billion) for long-term loans to support such projects.

Currently, countries eligible for these loans must partner within the EU or with Ukraine, Iceland, Liechtenstein, Norway, and Switzerland. The scheme is designed to benefit EU nations with higher borrowing costs through the Commission's favourable credit rating. The funding is targeted at acquiring various defence assets, including ammunition, artillery, and military drones.

Although the UK cannot directly apply for these loans, a defence pact with the EU in May opened a path for British firms to engage in projects funded by the scheme. Negotiations will determine the extent of British involvement, including an entry fee and contribution limits.

The current framework restricts UK defence companies to 35% of a project's total value, but discussions could see changes to this cap. This comes as France expresses desires to limit external benefits from EU loans. Defence Secretary John Healey emphasised the UK's willingness to contribute financially while seeking influence over project development and intellectual property rights.

EU relations minister Nick Thomas-Symonds expressed his aim to secure a deal before the application deadline in November. With 19 EU countries applying for the loans, Poland, Romania, Hungary, and France stand to receive significant funding. The UK government supports these discussions, highlighting the potential for joint expertise to bolster Europe's security.

Key Takeaways:

• The UK is negotiating entry terms for British firms in EU defence projects.
• SAFE scheme loans aim to boost EU defence amid increasing security concerns.
• UK firms currently face a 35% contribution cap, with potential revisions ahead.

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  Adapted by ASEAN Now from BBC 2025-09-19