Huawei is to be stripped out of Britain’s 5G phone networks by 2027 and UK's mobile providers will be banned from buying equipment after 31 December.
Oliver Dowden, the UK culture secretary declared that the country will be on an “irreversible path” to eliminating “high-risk vendors” such as Huawei in 5G by the time of the next general election in 2024.
Mr Dowden added that the cumulative cost of the moves when coupled with earlier restrictions announced against Huawei would be up to £2bn, and a total delay to 5G rollout of "two to three years".
"This has not been an easy decision, but it is the right one for the UK telecoms networks, for our national security and our economy, both now and indeed in the long run," he said.
China’s ambassador to the UK, Liu Xiaoming, tweeted: “Disappointing and wrong decision by the UK on Huawei. It has become questionable whether the UK can provide an open, fair and non-discriminatory business environment for companies from other countries.”
Despite the UK retreat on Huawei, the Conservative rebels believe the telecoms firm still represents an immediate national security risk and want the UK to follow the US and Australia, which have implemented more complete bans.
BT is set to be the telecoms operator most affected by the decision given it runs both the EE mobile network and Openreach, which provides fixed-line infrastructure to individual internet providers.
"We need to further analyse the details and implications of this decision before taking a view of potential costs and impacts," it said.
The UK last reviewed Huawei's role in its telecoms infrastructure in January, when it was decided to let the firm remain a supplier but introduced a cap on its market share.
In May the US introduced new sanctions designed to disrupt Huawei's ability to get its own chips manufactured. The Trump administration claims that Huawei provides a gateway for China to spy on and potentially attack countries that use its equipment, suggestions the company strongly rejects.
British-Chinese relations have grown increasingly strained over the last month as the UK has condemned a controversial national security law forced on Hong Kong.
Huawei plans to conduct a detailed review of what the UK’s decision will mean for the business, and plead its case.
Tobias Ellwood, chair of the defence committee said: "The 5G rollout is going to fundamentally change our lives, including how we defend ourselves. We’ve moved away from traditional battle lines.
"It's about exploiting the vulnerabilities of our digital world. Integrity and reliability of our critical national infrastructure is absolutely fundamental to our overall security.”
Meanwhile, an investigation by the Wall Street Journal in December 2019 found Huawei had benefited from £60 billion in tax breaks, cheap resources and other forms of Chinese state-backed financial assistance to help fuel its meteoric rise from a ten person company in the 1980s to the top of the global telecoms tree.
Huawei maintains it is a private company owned by its employees operating entirely separately from the Chinese state.