Britain says talks to join EU defence fund have broken down

LONDON/BRUSSELS, Nov 28 (Reuters) - Britain said on Friday that talks to join the European Union's defence fund SAFE had broken down, in a major setback to a much-vaunted post-Brexit reset of relations aimed at strengthening the continent's defence.

Prime Minister Keir Starmer had hailed a "new era" in Britain's relationship with the EU in May, with an agreement to reset defence and trade ties that allowed Britain to negotiate to join the a 150 billion euro ($173 billion) fund to rearm Europe.

But two days ahead of the deadline to conclude talks, Britain said that it wouldn't 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."

Under the terms of the fund, procurement contracts must ensure that no more than 35% of component costs originate outside the EU or other participating countries like Ukraine.

Trading in shares of Britain's biggest listed defence companies BAE Systems BAES.L, Rolls-Royce RR.L and Babcock BAB.L were not affected by the news.

An EU Commission spokesperson declined to comment on the outcome of ongoing discussions, but said they had been intense, 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."

($1 = 0.8654 euros)