Britain faces having to pay billions to EU in order for UK firms to access bloc's new €150bn defence fund
Sir Keir Starmer boasted in May how his Brexit 'reset' deal with the EU would pave the way for UK defence firms to access the Security Action for Europe (SAFE) fund.
The Prime Minister said British participation in the fund would support thousands of jobs and boost economic growth.
But Sir Keir was also warned there would be a 'pay to play' element for British access to SAFE, following French demands for a UK financial contribution.
According to the Financial Times, this will see Britain having to pay the EU a percentage of the value of any weapons bought from UK companies via SAFE.
The newspaper reported the exact figure Britain will have to pay to access the fund is still under discussion by EU member states.
They are finalising their position on the deal with the UK, which is expected to be published later this week.
Brussels is set to argue that because UK firms would receive EU money to create jobs and expand capacity under the scheme, London should recompense the bloc.
An EU diplomat said: 'What was written in the SAFE regulation is that there shall be a fair balance as regards the contributions and the benefits.'
Another diplomat revealed how France is pushing for a high UK contribution but other countries, led by Germany, want to ensure the UK is not dissuaded from joining.
SAFE was set up by Brussels amid the threat posed by Russia and following threats by US President Donald Trump to scrap American security guarantees for Europe.
The multi-billion fund will allow EU member states to take out loans for weapons from funds raised against the EU budget.
There are strict rules on where arms can be purchased from, with initial fears that British defence firms would be excluded from the fund.
These include a 'buy European' clause that means the fund can only be used to purchase arms from EU-linked countries or Ukraine.
Brussels officials previously outlined how the fund would only consider buying British arms if the UK struck a new security and defence partnership with the EU.
Sir Keir agreed such a partnership with the EU as part of his Brexit 'reset' in May.
In order for UK defence products to qualify, the value of their components from members of SAFE must be at least 65 per cent.
Other restrictions relate to the purchase of complex weapons systems where non-EU countries hold 'design authority'.
Concerns were recently expressed in Germany that the US has the power to shut off F-35 fighter jets, which are widely used across Europe.
But the US denied the existence of a 'kill switch'.
A Government spokesperson said: 'We won't preempt our discussions with the EU.
'It is in all our interests for the UK and EU to bring together our unique capabilities and expertise to make Europe a safer, more secure, and more prosperous place.
'That is why we agreed a landmark Security and Defence Partnership, enhancing our security and defence cooperation and delivering for citizens across the continent.'
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