Britain’s defence industry is to be blocked from profiting from the EU’s vast increase in spending on arms for Ukraine, under a leaked plan seen by the Guardian. A “massive order” of ammunition, ranging from small arms to 155mm artillery rounds, is being prepared in Brussels but only EU and Norwegian manufacturers will be able to take advantage. France, Germany and Italy, the home of Europe’s biggest arms manufacturers, are likely to be the biggest beneficiaries to the detriment of the UK, which is the world’s seventh largest arms exporter. “Essentially, this is a zero-sum game and the proposal will bolster European defence industry at the costs of those outside the union,” a diplomatic source in Brussels said. The EU is close to agreeing on its landmark move to jointly procure ammunition to help Ukraine in its war with Russia and replenish members’ stockpiles. The plan involves immediately transferring ammunition reserves and “rapidly” sending new joint orders to meet EU and Ukrainian needs as part of “a massive and strong signal to EU industry”. Hanno Pevkur, the defence minister of Estonia, said on Monday he believed ministers would reach a “political consensus” on joint procurement when they are scheduled to meet in Stockholm on Wednesday. According to the leaked discussion paper that will be in front of ministers, member states are initially being encouraged to offer up their spare stockpiles of ammunition to Kyiv, of which up to 90% of the cost could be reimbursed by Brussels. There will also be a seven-year plan to start this spring under which European industry will be encouraged to scale up manufacturing to meet both Ukraine’s demands and those of the member states. “The aggregated demands of both member states and Ukraine provide an opportunity to place a massive order to send industry a clear demand signal, enabling it to ramp up its production capacity in an orderly and enduring way across Europe,” the leaked paper says. According to the document, 25 EU member states and Norway have confirmed their interest in participating. The paper calls for a “fast-track” negotiation with suppliers in the EU and Norway over the size and cost of these orders, with contracts to be concluded “between end-April and end-May”. The EU policy discussion document, known as a non-paper, notes that there may be issues with the current capacity of European industry to meet the demands put upon it. The solution is not to turn to other major world suppliers, such as the UK, but instead to devise new industrial policies that could trigger a “rapid ramp-up of manufacturing capabilities”, the paper says. The loss of the European market for its ammunition exports will be a major blow to UK firms. According to ADS, a defence trade association, the British arms industry has an annual turnover of about £25bn and directly employs about 133,000 people, with a similar number of indirect employees. The shadow defence secretary, John Healey, accused the government of damaging British industry by failing to nurture a positive post-Brexit relationship with the EU. “Once again, UK defence firms find themselves at the back of the queue under the Conservatives. Ministers must negotiate a better deal for UK firms. A Labour government would rebuild relationships with European allies to keep Britain safe and promote greater defence industrial cooperation.” The five largest arms exporters from 2017 to 2021 were the US, Russia, France, China and Germany, according to the Stockholm International Peace Research Institute. Norway was the 22nd largest exporter of arms. The UK has committed £2.3bn in military assistance to Ukraine so far and has pledged to match that assistance in 2023. The EU has provided non-lethal and lethal arms through its European Peace Facility (EPC), committing €3.6bn (£3.2bn) so far. The total sum the EU can spend through the EPC to 2027 has been raised, however, to €5.5bn. Once those funds are “operationalised”, the EU’s high representative for foreign affairs, Josep Borrell, “intends to propose an extraordinary support package of €1bn focused on the delivery of ammunition, notably 155mm [rounds]”, the paper says. The joint procurement to follow will be made through the European Defence Agency (EDA), which was set up in 2004 to help the member states coordinate their militaries. The EDA can only procure from companies based in the EU and Norway, with whom the bloc has had an administrative agreement since 2006 – a deal that was expanded to cover defence procurement in 2008.