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Britain said on Friday that talks to join the European Union's defence fund SAFE have broken down, in a setback for a much-vaunted post-Brexit reset of relations aimed at strengthening Europe's defence.
Prime Minister Keir Starmer hailed a "new era" in Britain's relationship with the EU in May, with a deal to reboot defence and trade ties that allowed London to negotiate joining the 150 billion euro ($173 billion) fund to rearm Europe.
But two days ahead of the deadline to conclude talks, Britain said it would not be possible to reach an agreement.
"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," said Nick Thomas-Symonds, Britain's minister for European Union Relations.
"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."
'FRUSTRATING' SETBACK FOR EUROPEAN DEFENCE PROCUREMENT
Shares in Britain's biggest listed defence companies - BAE Systems, Rolls-Royce and Babcock - were not affected by the news.
Under the terms of the fund, procurement contracts must ensure that no more than 35% of component costs originate outside the EU or from other participating countries such as Ukraine.
Aerospace and defence industry group ADS expressed disappointment, saying the capped level of participation "does not represent the scale of the potential presented by SAFE".
"This lost opportunity for the UK's defence and security supply chain is a frustrating setback after the successful reset of UK-EU relations in May 2025, especially at a time when stability and investment in European defence is needed most," said Kevin Craven, CEO of ADS.
Negotiators had discussed whether British participation could instead be capped at 50% but Britain baulked at EU demands that it contribute billions of euros for access.
Starmer has sought to strike a contrast to the often rancorous relations between previous Conservative governments and the EU as they negotiated Britain's departure from the bloc, which was completed in 2020. He has also taken a leading role in co-ordinating European support for Ukraine.
An EU Commission spokesperson declined to comment on the outcome of the talks, saying they had been intense but had been carried out constructively and in good faith.
"If an agreement could not be found at this point in time, let's not forget that SAFE is open by design," the spokesperson said, noting Britain could participate up to the 35% limit.
"We of course remain fully committed to delivering our ambitious UK-EU security and defence partnership."
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