The European Union is mulling a €1bn (£870m) defence fund, as Britain’s impending departure raises hopes of deeper military cooperation in the bloc. The EU’s executive arm will outline plans on Wednesday for a fund to pool research into new military technology, such as drones, air-to-air refuelling planes and cyber-defence systems.

In an implicit challenge to Britain as it heads for the EU exit, the European commission will say that no single EU country – not even the largest – can afford to develop the most costly military equipment alone. “The development of a new generation of many major defence systems is today beyond the reach of a single EU member state,” states a draft paper seen by the Guardian. “‘More Europe’ in defence and security is clearly needed.”

If agreed by member states, it would be the first significant use of the EU budget for defence, although EU spending is likely to remain dominated by farm payments, road, rail and other infrastructure projects.

Sources in Brussels think the defence fund could rise to €1bn after 2021, following an initial €250m outlay in 2020 to kickstart new research projects. The figures have not been finalised and would have to be agreed by EU member states. Even if agreed, the defence fund would be a fraction of the EU budget – worth €155bn in 2016 – with almost three-quarters of spending earmarked for farmers and economic aid projects for poorer regions.

The commission will publish the plans on Wednesday, with a detailed budget proposal to follow in 2018.

The ideas will feed into a tough debate about the EU’s post-Brexit budget. Battle lines are already being drawn over how to fill the €10bn hole that will be left by the UK, with net payers, such as Sweden, insisting they will not stump up more money.

Despite inevitable wrangles over money, European leaders think defence can help revitalise the 60-year-old European project, after years of battling existential crises, from migration to Brexit. But plans for deeper military cooperation were drawn up long before Britain’s decision to leave, as a response to war and instability on the EU’s eastern and southern fringes.

While European Nato countries have been inching up defence spending, Brussels is concerned that Europe gets less bang for its buck, because of overlaps and duplication. Europe has 178 different weapons systems, compared with 30 in the US, which increases equipment costs. One standard Nato helicopter was developed in 23 different versions to accommodate differing national specifications.

Meanwhile, costs are escalating. The Eurofighter Typhoon jet cost €20bn alone in research and development, compared with total R&D spending of €9bn in the EU in 2014. The fighter jet, a joint project between Britain, Germany, Italy and Spain, was massively over budget and years behind schedule.

The EU’s military ambitions have often outpaced what individual member states can agree. Since 2007, the EU has been able to send rapid-reaction forces of 1,500 soldiers – known as battlegroups – to stabilise foreign crises, but has never done so.

One senior EU diplomat recently described battlegroups as the “biggest failure of European policy” and said the idea had foundered because defence chiefs did not trust the EU.

The EU also scaled back plans for a common military command centre – an initiative that has been incorrectly described by some British politicians as an “EU army”. Britain backed the plans in March, only to prevaricate on signing the legal text at the last minute, a delay that has infuriated some of the UK’s closest allies.

EU leaders are expected to discuss defence at a summit in late June, days after Britain is due to begin negotiating its EU exit. Although the defence fund plans would not come to fruition until after Brexit, the British prime minister is entitled to take part in the June discussions.

In the Brexit white paper, the government said it wanted to use the UK’s “privileged position in international affairs to continue to work with the EU on foreign policy security and defence”. The foreign secretary, Boris Johnson, has spoken of “docking stations and doorways” for further British involvement in EU foreign policy, but the issue has not featured heavily in the run-up to Brexit talks.