Sir Keir Starmer is close to striking a major trade deal with the EU that would allow British arms companies to sell billions of pounds of weapons to European allies.
British firms will be able to bid for the new €150 billion EU defence fund as part of Starmer’s reset with the bloc after the UK made significant concessions to Brussels on fishing rights.
The prime minister will host an EU-UK summit on May 19 in London as he seeks to ease trade barriers with Brussels.
Starmer is also expected to announce a deal worth £30 million for drones produced by Syos Aerospace, a New Zealand company with a factory in Hampshire.
On a visit to a military base with Christopher Luxon, his New Zealand counterpart, Starmer is expected to announce the two countries will begin work on a new defence partnership, replacing the one signed in 2015.
Britain has been lobbying for inclusion in Security Action for Europe (Safe), a joint fund used by the EU to buy ammunition, artillery, air defences, rocket launchers and drones.
British companies such as BAE Systems and Babcock were originally excluded from the fund — while countries such as Norway, Moldova, South Korea, Japan, Albania and North Macedonia were included — because the UK has not signed a defence and security pact with Brussels.
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It came after France and other countries insisted that the fund be guided by a “Buy European” principle.
President Macron has made a pitch for European allies to buy French air missile defence systems and fighter jets instead of American weapons.
“Those who buy Patriot should be offered the new-generation Franco-Italian SAMP/T. Those who buy the F-35 should be offered the Rafale,” he recently said.
Amid rising co-operation with France on Ukraine, however, there is growing confidence in No 10 that the defence pact will be signed, allowing British defence companies to bid for the EU defence fund.
“The mood music is good,” a British defence industry source said.
Starmer spoke with President Zelensky and Jonas Gahr Store, the prime minister of Norway, on Monday.
No 10 said that Starmer “reiterated his iron-clad support for Ukraine” in his conversation with Zelensky. A spokesperson said in his conversation with Store that “the leaders agreed there can be no let-up in their support for Ukraine“. The spokesperson said: “They also discussed the importance of keeping up economic pressure on Russia to ensure that they engage seriously in talks.
“On the topic of global trade, the prime minister reiterated his commitment to protecting UK interests through a cool and calm approach. The leaders agreed a trade war is in nobody’s interests.”
It came after British negotiators softened their stance on fishing. France has insisted the defence pact is linked to the row over haddock, herring and cod quotas.
Poland and the Baltic countries have been left bemused at the French determination to secure concessions on fishing at a time of war in Europe.
Kaja Kallas, the Estonian top diplomat of the EU, said that she was “surprised at how important the fish are”. “I think Kaja was speaking for all of us,” one British source said.
However, British negotiators are understood to have accepted EU demands for a multi-year deal on fish.
The present deal, which expires in 2026, reduced the quota that European fishermen could catch in British waters down to 75 per cent of its pre-Brexit level.
However, it was previously reported that significant parts of the British quota had been sold off to foreign-owned boats which sail under a British flag.
In 2021 the BBC reported that £160 million of the quota — 55 per cent of its annual value in 2019 — was owned by companies based in Iceland, Spain and the Netherlands.
The present arrangement has been described by the National Federation of Fishermen’s Organisations (NFFO) as a “neocolonial relationship with the EU”.
As part of the EU reset, Britain is prepared to offer a new multi-year deal to Brussels — rather than annual negotiations as done between the EU and Norway — and freeze fishing quotas, rather than reduce European access further, The Times understands.
Economists have pointed to the comparative sizes of the fishing and defence industries in the UK. The total value of British defence exports in 2023 was £14.5 billion compared with £1.7 billion of fish sales.
Starmer has also conceded to accepting dynamic alignment with the EU on food standards — effectively matching British legislation to EU laws — to remove sanitary and phytosanitary checks at ports such as Dover. He is also set to accept dynamic alignment on the Emissions Trading Scheme, a system of carbon levies.
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Officials told The Times that while there was no draft declaration for the summit in circulation yet, it was expected as early as next week.
“The British are making the concessions they need to,” an EU diplomat said. “That is positive and shows a maturity that was not there in the Brexit negotiations.”
Nick Thomas-Symonds, the Cabinet Office minister, has previously suggested a multi-year deal on fishing rights would be acceptable to Britain. In January he told the Commons business and trade committee: “As the trade and co-operation agreement stands at the moment, it would move into some sort of annual negotiations. I do think that having something that is more stable would be in our interests going forward.”
One outstanding area of disagreement is over an EU youth mobility scheme. Brussels wants a deal that allows 18 to 30-year-olds to move temporarily to the UK.
Yvette Cooper, the home secretary, wants the number of visas capped and is demanding any scheme is limited to one year, to avoid the numbers being included in migration figures.
Rachel Reeves, the chancellor, is understood to be in favour of the scheme after studies showed that it would boost the economy.
“The European Commission is confident there is a deal to be done,” a European diplomat said.
On Tuesday Reeves will travel to Washington for meetings with G7, G20 and IMF counterparts. Speaking before the visit, she said: “This changing world is unsettling for families who are worried about the cost of living and businesses concerned about what tariffs will means for them. But our task as a government is not to be knocked off course or to take rash action which risks undermining people’s security.
“Instead, we must rise to meet the moment and I will always act to defend British interests as part of our Plan for Change. We need a world economy that provides stability and fairness for businesses wanting to invest and trade, more trade and global partnerships between nations with shared interests, and security for working people who want to get on with their lives.”
A government spokesman said: “The upcoming UK-EU Summit will cover a range of issues as we look to build a stable and positive relationship that aligns with our national interest. No agreements have been reached and we have always been clear we will protect the interests of our fisheries.
“The UK has long been a leader in the defence and security of the Continent and we stand ready to negotiate a security and defence partnership agreement with the EU.”
