The United Kingdom is preparing to engage in discussions regarding its companies’ ability to participate in military projects funded by the European Union’s defence loans. At the moment, UK firms are missing out on this opportunity because they are not able to apply for these loans directly. That’s all about to change. A mutual defence pact signed up to in May between the UK and the EU has created the legal framework for British defence firms to take part in research and development projects that have been awarded EU funding.
The defence pact establishes a legal and institutional framework for UK-based companies to participate in EU-funded military projects. British companies can only contribute up to 35% of the total value of any finished defence product. This restriction is unprecedented for the industry. This condition is meant to provide a check on UK firms swamping the contribution from other EU member states.
Another major sticking point in the future negotiations will be the admission price. The EU is requiring this payment for the UK to remain in the defence loans programme. British ministers are keen to have an agreement concluded in the next few weeks. They are especially focused right now on the short term, with applications for that first round of bids due at the end of November. This urgency is grounded in the fact that EU defence loans are likely to be issued sometime early next year. British firms will want to know that they can compete strongly for these contracts.
In Nick Thomas-Symonds, the minister responsible for EU relations, the UK has someone who very much wants such a deal. His aim is to make British firms eligible to participate in this first round of bidding. UK defence companies are more than ready to jump on this funding opportunity. In reality, nineteen of the twenty-seven EU countries have already signed up for access to the loans.
Of these, Poland is the biggest beneficiary, receiving more money than any other country — at €43.7 billion. This historic allocation reveals the EU’s central strategic preoccupation with building military capacity among member states. It serves to underline the competitive pressure UK firms will be up against should they ever gain access to the loans.
The negotiations are still developing. Putting the British firm’s maximum contribution limits in context and what the entry fee should be. The outcome of these talks will determine how effectively UK companies can engage in EU-funded military projects and contribute their expertise within the established parameters.