Commentary on Political Economy

Thursday 21 March 2024


It’s time for a deal with the EU on defence

The Times

Back in the depths of the Brexit wars, when Theresa May had lost her overall majority and Westminster became a battleground, the British government made an offer to the European Union.

May was prepared to agree a defence and security pact, she told the EU. Speaking at the Munich Security Conference in February 2018, the PM said that “rigid institutional restrictions” should not be allowed to get in the way of close co-operation on policing, justice and defence.

It all came to naught. In the Britain of six years ago it was never going to work. Both parliament and the country were split. Hardline Brexiteers were suspicious that a defence and security pact might be part of a Remainer effort to block or dilute Brexit.

Hardline Remainers at the time were more focused on preventing Brexit from taking place at all, so May’s proposed scheme to remain close to the EU was dismissed as a distraction from the campaign that was about to be launched in April 2018 calling for a second referendum.


Since then a period as long as the Second World War has passed and a lot has changed in Europe. There is an actual war on and neither the EU nor the UK has, on its own, sufficient capacity to manufacture the munitions and materiel needed to help Ukraine and deter Russia from future aggression. At the same time, there is a risk that the US will reduce its commitment to defending Europe.

As a result, there is a lively conversation going on in EU capitals about how the UK — a major defence manufacturer, as well as one of only two nuclear-armed powers in Europe — can be involved in this effort to help to rearm when we sit outside the single market. The door is suddenly ajar on defence and security and it looks as though it will fall to the Labour Party to take part in talks on new deals between Britain and the EU after the general election.

John Healey, the shadow defence secretary, and David Lammy, the shadow foreign secretary, have both spoken of the need to seek such agreements, either a security pact on policing and justice that also touches on defence or a more grandly named defence and security agreement.

What does that mean in practice? One possibility is that outside the terms of the Brexit deal — the Trade and Co-operation Agreement — defence and defence-related technology could receive a “carve out”, or a blind eye could be turned, that makes co-operation easier across borders.

In blunt terms, if you are a defence manufacturer producing a product for Ukraine that is one third made in Norway, one third in Britain and a third inside the EU, the rules governing the single market make everything more complicated and slower when it comes to buying and selling.

On procurement — writing the rules that govern how governments buy the kit they need — might the EU also undertake to treat British-based defence companies as being de facto within the single market?

Labour insists that it doesn’t want to rejoin the single market or the customs union, so if the EU does want Britain to boost defence manufacturing, some kind of workaround pact to make trade easier will have to be found.


The cold, hard numbers make it obvious why it should happen. According to the European Defence Agency, the European defence industry had turnover of €84 billion in 2021. That is simply too small in comparison to the US, which has a population only two thirds the size of the EU.

America dominates defence. A European parliament study last year found that only 17 of the world’s top 100 defence companies are headquartered in the EU, whereas 46 of the top 100 are based in the US. The top five American companies alone had combined total sales that were more than double those of the entire EU defence industry.

In 2022, the turnover of the British defence industry was £22.2 billion (€26 billion), according to the defence industry trade body ADS. That’s obviously way smaller than the US, but note that it is a sum not far off a third of the combined turnover of the EU’s companies.

So, in a war era it will make a meaningful difference to our collective security if we increase co-operation, make more together, and find pragmatic ways to fuse British and European efforts.

Some of my fellow Brexiteers, and furious Remainers who want to rejoin the single market, will at this point be having kittens. Indeed, I was among the sceptics when the concept of a pact was first floated by Labour.

There must, of course, be a clearly understood separation between defence production and operational matters. The EU is a powerful regulator of a trade bloc and its rules but it is not, and won’t become, the organiser of Europe’s defence.


Nato is the operational body that counts. It is the number one vehicle for European and British security and, even if the US were to leave under a re-elected President Trump or another populist successor, the European pillar of Nato is where military decisions will be made. The welcome message from Labour is that Nato remains absolutely paramount.

Of course, every time one says that a reasonable compromise should be possible when it comes to EU-UK relations, the shouting starts in Britain, while in Brussels there is talk of the beastly Brits wanting to cherry-pick from the EU buffet.

But, as I said, we’re in an era of conflict. Let’s grow up. The fog of a parliamentary war over Brexit has cleared and in front of us is a real war, an existential military conflict in Ukraine that threatens to spill over into the rest of Europe soon. It is in everyone’s interests, with Russia on the prowl, that we find a way to co-operate.

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