The British, aware of the Italian fleet's movements, sent their forces north to intercept them before they could come anywhere near the cargo ships. At 11:45 on the 27th the British were informed that the Italians were only 50 miles away and closing for battle. At this point Force D had not yet arrived from Alexandria and the British were outgunned, but only 15 minutes later Force D was spotted and the tables turned. The two forces were fairly even; although the Italian ships had better range and heavier fire, the British had an aircraft carrier, which had recently proven itself to be equal to a battleship at Taranto. However the Italians had a very serious limitation: their commander had been given orders to avoid combat unless it was heavily in their favor, so a decisive battle was out of the question.

Admiral Somerville deployed his forces into two main groups, with five cruisers under Rear Admiral Lancelot Holland in front and two battleships and seven destroyers in a second group to the south. Much further south, aircraft carrier HMS ''Ark Royal'' was preparing to launch a force of Fairey Swordfish. The Italians were organized into three groups, two from six heavy cruisers and seven destroyers and a third of two battleships and another seven destroyers in the rear. At 12:07 it was clear a battle was about to start with evenly matched forces, so the Italian commander ordered the cruiser groups to re-form on the battleships and prepare to depart. However by this point the lead cruiser formation had already angled toward the British and was committed to combat.


At 12:22 the lead groups of both cruiser forces had come into range and ''Fiume'' opened fire at 23,500 meters. Rapid fire between the two forces continued as the distance between them dropped, but of the two groups the Italian forces outgunned the British. An older battleship, the HMS ''Ramillies'', evened the odds but was too slow to maintain formation and dropped out of battle after a few salvos at 12:26. Four minutes later Vice Admiral Angelo Iachino, commander of the Italian cruiser group, received order to disengage although at this point the battle was slightly in their favor. Iachino ordered an increase in speed to 30 knots, laid smoke and started to withdraw. During this time the Italian destroyer ''Lanciere'' was hit by a salvo from ''Manchester'' and seriously damaged, although she was towed to port after the battle. The British heavy cruiser ''Berwick'' was hit at 12:22 by a single 8-inch shell on her Y Turret which was knocked out, killing 7 of her complement, and a second hit at 12:35 which did little damage.

For the next few minutes the tables turned in favor of the British, when the battlecruiser ''Renown'' closed the distance on the Italian cruisers. This advantage was soon negated when Vittorio Veneto opened fire from 29,000 yards at 13:00. Vittorio Veneto fired 19 shells in 7 salvos from long range and that was enough for the now outgunned British cruisers. Both forces withdrew, the battle lasting a total of 54 minutes and causing little damage to either side.