On Tuesday 16 July 2025, the European Commission unveiled its vision for the 2028–2034 Multiannual Financial Framework (MFF). This long-term EU budget proposal could redefine how the bloc spends, saves, and sets its strategic approach in an increasingly uncertain world. This proposed budget totals nearly €2 trillion, equivalent to around 1.26% of EU‑wide Gross National Income (GNI). To be adopted, the MFF requires unanimity from all 27 member states and sign-off from the European Parliament. Negotiations of the MFF, with the European Council and the European Parliament, are expected to last until 2027, and will only come into force in 2028.

What is the MFF?

The MFF is a long-term budget, currently covering a period of seven years. The purpose of the MFF is to ensure that the EU’s expenditure develops within the spending limits of its own resources, setting out provisions with which the annual EU budget must comply. The MFF aligns spending with the EU’s long-term political priorities. The MFF sets limits (also called ‘ceilings’) for EU annual expenditure for total commitments in a given year (i.e. the maximum amount of legal obligations such as contracts or grants) and total payments in a given year (the actual amounts spent), in each area of EU spending (‘headings’).

Initially proposed in 2018, the last MFF covered the years 2021-2027 but included a revised proposal following the Covid-19 outbreak, which set up a recovery instrument worth EUR €750 billion (in 2018 prices). At the time, this highlighted the need for the budget to require flexibility to deal with unexpected challenges.

MFF 2028-2034

This MFF takes place against the backdrop of some high-stakes geopolitical developments, including responding to Russia’s war of aggression in Ukraine, climate change, migration pressures, and (though not explicitly stated) US-China tech rivalry. These are all factors fuelling a push for EU strategic autonomy. Highlighting the rapidly evolving global landscape and the growing demands in key areas such as competitiveness, defence, security, green and digital transition, and resilience to external shocks, the Commission is proposing flexibility as a key feature of this MFF. This flexibility is intended to give the EU the capacity to act – and react – when circumstances change.

Shift in priorities

The proposal looks to substantially increase investment and financing in defence, security, and space, looking at €131 billion for Defence and Space in the European Competitiveness Fund (5 times compared to the current financial framework), steering away from legacy sectors where EU money has been traditionally spent such as agriculture and regional development. The €17.65 billion allocated for Military Mobility (within the Connecting Europe Facility) represents a tenfold increase compared to the current MFF, reflecting the EU’s strengthened commitment to enhancing the transport of troops and equipment. Investments will focus on improving transport networks, dual-use infrastructure, and developing critical corridors for efficient troop movements.

National and Regional Partnership Plans

Existing funds and instruments, including the Cohesion Policy and Common Agricultural Policy (CAP), will be merged into tailored National and Regional Partnership Plans, to streamline complex programming processes and ensure coherence. It should be noted this has raised political concerns about regional autonomy and fears of reduced support for agricultural communities.

Additionally, the plans will be tailored to the specific needs of Member States (MS) and consequently infrastructure funds will favour Eastern border regions most affected by activity in Russia and Belarus, such as the Baltic countries, Poland and Finland. Financing for migration and border management will triple, aimed at incentivising MS to implement the Pact on Migration and Asylum and the EU’s Internal Security Strategy.

European Competitiveness Fund

The new European Competitiveness Fund, encompassing €409 billion including Horizon Europe, will provide an unprecedented support to European innovators in research, innovation, development and deployment. As described by Ursula Von der Leyen, President of the European Commission, this competitiveness boost for Europe will be used “to secure supply chains, scale up innovation and lead in clean and smart technology”, focusing on EU public goods and supporting “made in Europe” technologies, products and services.

The European Competitiveness Fund is divided into (Bn):

  • Horizon Europe: €175.3
  • Defence and Space: €130.7
  • Digital transition: €54.8
  • Health and bio-economy: €22.6
  • Clean transition and decarbonisation: €67.4

While Horizon Europe will be built around four pillars:

  • Excellent Science
  • Competitiveness and Society
  • Innovation
  • European research Area
  • Global Europe

Global Europe

This Instrument worth €200 billion will encompass humanitarian aid, development finance, and support for accession countries. It will continue financing Common Foreign and Security Policy actions, while also allowing “closer cooperation with third countries in support to internal security of the EU”.

Conclusion

This MFF signals a strategic pivot considering shifting geopolitical, economic, and environmental challenges, reflecting a more assertive and security-oriented EU. It looks to reshape the architecture of its budget by prioritising defence, innovation, competitiveness and crisis readiness over legacy areas like agriculture. It reflects an aim to simplify and render the budget more flexible by redistributing spending across different sectors and members states to fit modern geopolitical, climate, and economic realities.

The UK and EU signed a defence and security partnership on 19 May 2025, setting the stage for deeper collaboration and dialogue across a wide range of areas, ranging from maritime security, space security, tackling hybrid threats, and enhancing the resilience of critical infrastructure. Under the MFF, the EU funds key defence-related programmes such as the European Defence Fund (EDF) and Military Mobility. The agreement opens the door to exploring UK participation in similar initiatives foreseen under the Competitiveness Fund and Connecting Europe Facility, with third-country access and joint-investment offering a potential pathway.

While third-country participation in EU funding instruments is possible in principle, it is subject to EU discretion and political approval. To participate in these programmes, the UK will need to negotiate tailored agreements, likely on a case-by-case basis, addressing key issues such as security conditions, industrial reciprocity, data and IP protection. The UK has already followed this path with Horizon Europe, successfully negotiating terms and securing formal association to the programme in September 2023.

ADS and its members have played a leading role in advancing industrial diplomacy by actively engaging with its European counterparts, notably GIFAS (France) and BDLI (Germany). Through dialogue and close collaboration with these national trade associations, ADS is working to strengthen UK industrial bilateral relations with key EU Member States. Through official channels, such as the Ministerial Equipment & Capability Cooperation (MECC), these efforts have focused on aligning industry positions on strategic issues and fostering cross-border cooperation in areas such as supply chains, innovation, and defence capability development. This sustained engagement supports broader UK-EU dialogue and helps ensure that UK industry remains a credible and constructive partner in the European defence industrial base.

As political and industrial dialogues continue to deepen, these efforts lay the groundwork for a more integrated and resilient UK-EU defence and security partnership – supporting economic growth and jobs on both sides, tackling industrial fragmentation, and positioning industry as a key driver of practical cooperation.