Sir Keir Starmer has said joining a £78bn (€90bn) European Union loan scheme to support Ukraine will be "very good" for relations with the bloc and create defence jobs in the UK.
The prime minister discussed contributing to the loan arrangement during a meeting of European leaders in Armenia on Monday, and reiterated his view that it is in the UK's "national interest to be close with Europe".
Sir Keir is pushing for closer economic and strategic cooperation with Europe, which he says would boost growth and improve UK security.
However, he refused to be drawn on a Times report that the EU could ask for £1bn a year in financial contributions in return for a wider trade deal.
The prime minister held talks with EU Commission President Ursula von der Leyen on Monday on the sidelines of a European Political Community (EPC) summit, a grouping made up primarily of EU members and founded after Russia launched its full-scale invasion of Ukraine.
Ahead of the gathering, Sir Keir said the talks would aim to strengthen Ukraine's defences, while also trying to give UK firms access to future contracts.
Last month, EU leaders approved the two-year loan deal for Ukraine after Hungary lifted its veto, with the funding described as "a matter of life and death" by Ukrainian Deputy Prime Minister Taras Kachka.
Two-thirds of it will be spent on bolstering Ukraine's defence needs while the rest will go on broader financial assistance.
Sir Keir said the "benefit there outweighs the cost" of the UK contributing to the loan, both in terms of supporting Ukraine and as a way of increasing cooperation with Europe.
In a joint statement, Sir Keir and Von der Leyen said the UK's plan to join would be a "major step forward in the UK-EU defence industrial relationship" if it were to go ahead.
They also said talks would begin on the UK participating in an EU innovation fund which focuses on green energy.
Those talks came as Sir Keir continued to push for a wider economic deal with the EU, building on the "reset" agreement announced in May 2025.
The Times, citing an unnamed European diplomat, reported that the EU could ask for £1bn a year in return for further access to the single market.
Asked about that report, Sir Keir said it was "in our national interest to be closer to Europe", without commenting directly on the figure.
He added: "Whether that's the new EU loan scheme, which we are discussing with them, that's of great benefit to Ukraine, but it's also a great benefit to the UK as well, in terms of the jobs that it will create ... the benefit there outweighs the cost.
"But more generally, it is important that we see our future as a closer relationship with the EU that's in our national interest, and that's what I've been discussing here and on previous occasions."
Separately, EU relations minister Nick Thomas-Symonds said of the £1bn report: "No, I've not come across, don't recognise that figure."
He added: "It is always about… those two principles – national interest, value for money - and that's how I'll continue to judge it."
Sir Keir has repeatedly outlined a desire for closer relations with Europe, including closer ties on security and the economy, but has said it would not amount to a reversal of Brexit.
Last month, the Conservatives and Reform UK made clear their opposition to a government plan for legislation to allow the UK to adopt new EU laws without Parliament having to hold a full vote each time.
Sir Keir was one of 48 heads of state and government invited to attend the EPC summit in Yerevan, Armenia.
The meeting comes as European nations plan for how to boost their own defence capabilities, as fears of the US withdrawing support from Nato continue to grow.
Speaking at the summit, Sir Keir said that "some of the alliances that we have come to rely on" are "not in the place we would want them to be".
"There is more tension in the alliances than there should be and it's very important that we therefore face up to this as a group of countries together," he said.
On issues of defence, trade and energy, "we need a much stronger Europe", he added.
Sir Keir met Ukrainian President Volodymyr Zelensky at the talks, with the Ukrainian president asking him to pass on his "best regards and thanks" to King Charles III for his "strong words" in support of Ukraine during his recent state visit to the US.
The UK is "ready to do the necessary work" with allies on Monday to give Ukraine the "support you need, the pressure you need to continue to put on Russia to make sure that we get a just and lasting peace, but one that is right for Ukraine", Sir Keir told Zelensky.
Further UK sanctions on Russian companies are expected to be announced this week, in a bid to disrupt military supply chains, Downing Street has said.
No 10 also said Sir Keir would the situation in the Middle East with European partners at the EPC, including how they can contribute to security in the Strait of Hormuz.
Iran has severely limited traffic through the vital oil shipping channel in response to the bombing campaign by the US and Israel, which began in February.
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