The UK Government will reportedly blacklist Huawei if the country’s security & intelligence agencies find any malware or spyware in the Chinese communications giant’s UK operations, but any such move could lead to a damaging multibillion-pound trade war between the UK and China.

Blacklisting of Huawei could also derail the roll-out of the UK’s economically crucial 4G mobile internet services.

The UK aims to double its trade with China to £62 billion by the year of 2015, but the game could totally change if the Chinese communications giant is blacklisted.

Huawei controls nearly 25 per cent of the European Union’s telecom-equipment market. It has won more than 50 per cent of all the contracts for 4G infrastructure technology awarded by different European countries. In addition, Huawei is supplying the 4G technology for EE (Orange plus T-Mobile), and has signed similar deals with 3UK and O2.

Many European experts believe that Chinese telecom firms’ dominance in the Europe could pose a "major security risk". Brussels also believes that the Chinese firms could facilitate cyber-spying for the China.

However, Huawei has denied any link between its global operations and state-sponsored cyber-spying.

The intelligence report will land on Prime Minister David Cameron's desk sometime within the coming two weeks.