BRUSSELS (Reuters) - Fifteen European Union countries including Britain signed the first project under its new defense research fund on Wednesday, the latest small step toward integrating European militaries and their industries.

While the 35-million-euro ($43 million) EU grant for naval surveillance technology is modest, the fund aims to grow from its pilot phase to a multi-mullion-euro undertaking from 2021.

“It’s an important moment, we’ve managed to gather together 42 companies from 15 member states,” European Industry Commissioner Elzbieta Bienkowska told reporters following a signing ceremony.

Italy’s aerospace and defense group Leonardo SPA will lead the Ocean2020 project that also includes Estonia, France, Greece, Lithuania, the Netherlands, Portugal, Spain and Sweden.

Officials say years of cuts in defense research have put Europe’s future military capabilities at risk, but now France and Germany are leading a broad effort to develop and deploy the bloc’s armed forces together.

The signing at the European Commission follows a flurry of diplomatic breakthroughs on defense collaboration after Britain - Europe’s main military power along with France - voted in 2016 to quit the EU. London long blocked such plans, fearing the creation of EU armed forces.

Facing a range of threats on its borders from the Caucasus to the Sahara, EU states, now unfettered by British opposition, launched a pact in December to integrate defenses.

Earlier this month, 25 countries also agreed to develop their first joint projects under the pact.

The European Commission has proposed a 1.5 billion euro annual European Defence Fund to support defense capabilities that will include 500 million euros for defense research, up from the current 90-million-euro pilot phase.

The Commission hopes EU governments will add to the fund to develop projects and weapons, eventually taking it toward 5 billion euros a year, with assets owned by member states.

“WE NEED THE UK”

The long-term EU goal is in coordination with NATO but to reduce reliance on the United States, which wants Europeans to pay more for their own security.

Britain is concerned about being left outside the new cooperation and missing out on weapons projects. Prime Minister Theresa May wants to reach a “security treaty” with the EU by 2019.

It was not immediately clear whether Britain could continue in Ocean2020 after it leaves the bloc in a year’s time.

Leonardo’s CEO Alessandro Profumo said it was important for Britain to remain in European defense efforts, partly because the Italian firm has 7,000 staff in Britain. “Not only for us but for the European defense system, we need the U.K.,” he told reporters.

Britain hopes negotiations on its future security role in the EU will start soon. But EU officials said May would need to submit a formal paper to detail her ideas and then allow EU and British negotiators to move forward.