After SAFE: Consequences for EU-UK defence industrial cooperation and potential ways forward

Nicolai von Ondarza explores the possible avenues for UK-EU defence cooperation following the breakdown of talks on UK participation in the EU’s SAFE programme.

Deeper cooperation in security and defence policy is one of the main aims of the current Renewed Agenda between the EU and the UK. Given the breakdown of the liberal rules-based international order and the geostrategic pressures facing the UK, the EU and its member states, this seemed the most obvious starting point of the ‘reset’. In this spirit, as part of the May 2025 EU-UK summit, both sides signed their first ever ‘Security and Defence Partnership’ (SDP).

However, in November 2025, talks broke down on one of the key aims of the SDP, UK participation in the EU’s “Security Action for Europe” (SAFE) programme. Three months later, amid further transatlantic turbulence, the European Parliament has called for a resumption of talks on UK participation in SAFE, whereas UK Prime Minister Keir Starmer also signalled an openness to return to the question of EU-UK cooperation on defence financing. But can the breakdown easily be reversed?

SAFE was setup to enable third county participation

SAFE matters because it was set up by the EU in the first half of 2025 as one element of a push to strengthen European defence spending. It is a €150bn loan facility, where the EU provides loans to EU member states for defence investments, preferably based on joint procurement and/or cooperation with Ukraine. This sits alongside the decision to exempt defence spending from EU fiscal rules, which makes it easier for EU member states to ramp up their defence spending. So far, it is shaping up to be one of the most successful EU instruments for defence cooperation, with all the money already accounted for. Out of 27 member states, 19 applied for EU-backed loans and about half of their spending plans are already approved.

From its design, the SAFE instrument was meant to be open to third countries like the UK. For this, SAFE changed the EU’s model for external cooperation. Whereas most previous EU defence industrial initiatives were only open to its member states or those integrated into the single market via the European Economic Area (essentially Norway), SAFE explicitly allowed procurement from industry in third countries with whom the EU has signed an SDP. This turns cooperation into a political choice rather than resting on the legal requirement to be integrated into the single market. Yet, whereas the EU came to an agreement with Canada on SAFE-participation, similar talks with London broke down over the design and size of what would constitute a ‘fair and proportionate’ UK financial contribution to SAFE.

The direct effects of this failure are clear. The SAFE regulation stipulates that at least 65% of the value of a contract should go to suppliers from inside the EU, the EEA, Ukraine or partner countries. While UK defence companies may still play a part, their contribution to any orders is limited. And as the spending plans for using the €150bn loans have already been put forward and largely been approved, that ship has now sailed.

The danger of cascading effects

There are, however, reasons to restart talks. The first is the risk of cascading effects. The SAFE instrument sets a precedent for how the EU will design a ‘European preference’ in future EU defence initiatives. As SAFE is seen as a success, there are already conversations for a follow-up. The EU’s next multi-annual financial framework is also set to include the largest budget for defence related spending at EU level ever.

These cascading effects can already be seen in the design of the €90bn loan for Ukraine, of which €60bn are targeted at strengthening Ukraine’s defence capabilities and military procurement. As the servicing costs from the loan are covered by the EU budget, the EU institutions modelled the conditions for how Ukraine can spend the €60bn on SAFE, meaning with a ‘European preference’ of at least 65% for EU/EEA/Ukrainian companies, except in special circumstances where EU alternatives are not available such as Patriots air defence missiles.

This would have again locked out UK defence companies. For instance, the Franco-British storm shadow missiles could, from this loan, only be acquired from their French and not their UK production site. In the final decision, to avoid this fragmentation, the EU decided in early February to leave a door open: The loan would also be open to purchases from third countries that have a participation agreement with SAFE – so far only Canada – or those who are ‘providing significant financial and military support to Ukraine’ and agree to share ‘fair and proportionate financial contribution to the costs arising from borrowing’. The latter could provide the basis for full UK participation at least on the Ukraine loan, on which EU-UK talks have already started.

Beyond the impact on industry, the failure to agree on SAFE is the wrong political signal at the worst possible moment. As the foundations of the European security architecture are under threat, like-minded Europeans should take every opportunity to reduce barriers between the EU and NATO and work together. In this context, London and Brussels can’t afford to be held back by old Brexit wounds.

The way forward

Taken together, it is in the mutual interest of both the UK and the EU to resolve the impasse on SAFE sooner rather than later. Legally speaking, even though the first SAFE projects are now under way, talks can be resumed at any time. Politically, both sides should pre-coordinate a resumption to such an extent that this time success is all but guaranteed. It might be wise to aim for an agreement on the Ukraine loan first to set the scene for a revisiting of the SAFE question at the 2026 EU-UK summit. For the UK, this would help prevent a gradual structural decoupling from EU defence finance; for the EU it would reduce the risk of fragmenting European defence industry and strengthen Europe’s capacity to deliver capabilities at scale.

By Dr. Nicolai von Ondarza, Head of the EU/Europe Research Division at SWP and an Associate Fellow at Chatham House.