Chancellor John Healey's Treasury has agreed with Canada to develop a framework of cooperation between the two countries' separate defence-financing initiatives, after the governments concluded that their proposals should not be merged.
In a joint statement on Sunday, HM Treasury and the Department of Finance Canada said they had "mutually concluded that it is best to develop two distinct but complementary institutions that work in partnership": the UK-led Multilateral Defence Mechanism and Canada's Defence, Security and Resilience Bank.
'Distinct but complementary'
The statement said that, as they are operationalised, the two institutions will be designed to work in close partnership "so that they can support each other on emerging industrial priorities, investment opportunities and strategic financing challenges". Together, it said, they will provide complementary tools "to strengthen the defence industrial base and enhance collective defence readiness".
Both governments reiterated their commitment to strengthening defence financing and "improving the efficiency of spending to transform our collective defence capabilities".
The decision means Britain will not join the Canadian-led bank. A senior Canadian government official said the two sides had concluded that it would be better for the Canadian-headquartered bank to focus on providing low-cost capital, with the British initiative focused on procurement.
Two institutions, different jobs
The Multilateral Defence Mechanism, which the UK is developing with the Netherlands, Finland and Poland, is designed as a new financing model to accelerate defence investment, stimulate joint procurement and bring together demand from allies for critical defence capabilities. Its members aim to set it up by 2027.
Canada's bank is expected to put greater emphasis on supporting investment in defence industries and supply chains, including lending to individual countries.
Prime Minister Andy Burnham discussed the complementary work of the two institutions with Canadian Prime Minister Mark Carney when the pair met in September, before watching their football club Everton play.
Sunday's statement did not set out a headquarters, membership list, capital commitment or launch date. Those details will determine the scale of the two institutions and whether their cooperation delivers lower procurement costs or faster investment.
The agreement comes days before Healey delivers his first Budget as Chancellor on Wednesday.
