France has recently raised objections to the United Kingdom's involvement in a European Union-backed €5 billion equity fund for tech startups.

European diplomats indicate this move underscores the ongoing tension in negotiations to "reset" the relationship between the EU and the UK.

The UK, which left the EU via Brexit six years ago, has agreed to provide €150 million in seed funding for the fund. The initiative is designed to boost investment in Europe's technology sector amid rising competition for technological dominance with the United States and China.

However, diplomatic sources say France is seeking to attach strict conditions to any agreement. One EU diplomat reported that Paris believes the UK, no longer a member state, should not be "given opportunities" and insists the program should remain an EU initiative benefiting its members.

France and other member states also argue that reaching a side deal with the UK could weaken the EU's leverage in demanding concessions from London before a critical summit this autumn, which will finalize the "reset" plan. Another diplomat described France's position as tough, with three or four other countries questioning what they would gain from allowing the UK into the fund, suggesting that "quid pro quo" conditions are necessary.

Diplomats say time is running out to resolve French objections so the UK can be included in the next cycle of the "European Expansion Fund," starting in 2027.

French officials, however, state that Paris is "not opposed" in principle to the UK's participation but has requested details from the European Commission on how non-member state participation would work, describing it as a "technical debate" over calculation methods.

This dispute is somewhat similar to discussions over the UK's involvement in a €150 billion EU defense procurement fund. Those talks collapsed in November after the UK rejected Brussels's demand for a multi-billion-euro contribution.

A summit originally scheduled for July to seal the "reset" deal was shelved following the resignation of former UK Prime Minister Keir Starmer. No new date has been set, though diplomats expect it to occur in late October or early November.

The UK is seeking agreements to eliminate border checks on animal and plant products, realign carbon pricing mechanisms, and establish a limited youth mobility scheme for people aged 18-30, but significant differences remain between the two sides.

The "European Expansion Fund," commercially operated by the Swedish private equity firm EQT, is part of the €96 billion "Horizon Europe" research program, which the UK re-joined in 2024 as an "associated country."

Diplomats say the European Commission's Research and Innovation Directorate has held "productive" talks with the UK in recent months but has not yet submitted a formal proposal for the UK's inclusion.

The fund's current cycle ends in 2027, with the next cycle running until 2034 and expected to exceed €5 billion in size.

The UK Cabinet Office declined to comment on ongoing negotiations, while an EU Commission spokesperson said discussions are continuing and it is "too early" to comment on the various positions.