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France has raised questions over UK participation in a €5bn EU equity investment fund for tech start-ups, in a move that European diplomats say highlights the continuing tensions over the EU-UK “reset” negotiations.
The UK, which left the EU under Brexit six years ago, has agreed to contribute €150mn in seed capital for the fund, which is designed to boost investment in Europe’s tech sector as it struggles to compete with the US and China in the race for technological domination.
Ekaterina Zaharieva, European commissioner for start-ups, research and innovation, told the FT in May there was a “mutual interest” in the UK joining the fund, but diplomats now say Paris is seeking to attach stringent conditions to any deal.
“The French are raising objections. They argue the UK is not in the EU, so why are we gifting the British opportunities when we need to ensure this initiative is an EU initiative for the benefit of EU member states,” said one EU diplomat.
France, alongside some other EU member states, has also argued that striking side deals with the UK risks reducing EU leverage to extract concessions ahead of a crucial summit this autumn to finalise the existing “reset” package with the UK.
“France is taking a hard line, but three or four other member states are also asking ‘what’s in it for us?’ if we let the UK join the Scaleup fund — some are arguing there needs to be a ‘quid pro quo’,” a second diplomat added.
Diplomats said the clock was now ticking on efforts to resolve French objections in order for the UK to be included in the next cycle of the Scaleup Europe Fund, which starts from 2027.
French diplomats said Paris had “no objection” in principle to the UK joining the programme, but had requested details from the European Commission on how the UK — as a non-EU state — should participate in it.
“This is a technical debate. Questions have been sent to the Commission to understand the method of calculation for UK participation,” they added.
EU member states face a 25 per cent cap on the amount of funds they can attract from the pool. Outstanding questions remain on the level of the cap for non-EU members, and the link between contributions and the level of disbursement.
The argument in some ways echoes the discussions over UK participation in the EU’s €150bn defence procurement fund, which broke down acrimoniously last November when the UK refused Brussels’ demand for billions of euros in contributions.
Plans for a July summit to finalise the outcome of UK-EU “reset” negotiations were shelved after the resignation of Sir Keir Starmer as UK prime minister. A new date has not been set, but diplomats expect a summit in late October or early November.
The UK is seeking a deal to remove border checks on plant and animal products, an agreement to re-link the UK and EU carbon-pricing scheme and a limited Youth Experience Scheme for 18- to 30-year-olds, where significant gaps remain between the two sides.
The Scaleup Europe Fund, which will be run on a commercial basis by Swedish buyout firm EQT, is part of Horizon Europe, a €96bn research programme that the UK rejoined as an “associate country” in 2024.
Diplomats said the EU’s directorate-general for research and Innovation had held “productive” negotiations with the UK to join the scheme in recent months, but had still not tabled a formal proposal for the UK to join.
The fund’s current cycle ends in 2027 and the next cycle, which will run until 2034, is expected to surpass €5bn, made up of €1bn in Commission seed funding, with the balance coming from pension funds and other sources of private capital.
The UK’s Cabinet Office said the government would not comment on ongoing negotiations.
A spokesperson for the Commission said discussions were continuing and it would be “premature to comment on any positions”.
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