Business Secretary Greg Clark has contacted 13 technology companies telling them they need the Government go-ahead before embarking on any new contracts.
The stand-off centres around Britain’s role in Galileo after it leaves the EU next March.
The European Commission declared it would “no longer be appropriate” for Britain to be involved in “information exchanges” about Galileo and suggested that it could be a “security threat”.
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British expertise is key to the cryptography systems used by Galileo and there are concerns British know-how could be lost to Europe if companies are forced to work there to remain part of the programme.
The MoD has started work on a rival system in case the UK is barred from the sat-nav systems which the armed forces and emergency services will rely on in the future.
Britain has pumped about £1.2bn of taxpayers’ money into Galileo – the EU’s rival to GPS - since 2003 when it was first commissioned, and the Government is now looking at ways of claiming a refund.
Mr Clark said the Government “strongly disagrees with the EC’s position” and insisted working together on the project, which is due for completion in 2020, “is in our mutual interest as part of our steadfast commitment to the continent’s security”.
He also warned “excluding the UK and our unique expertise will lead to increased costs and delays”.
But he added that unless Britain got “clear assurances” British companies would be able to take part “on an equal basis and without continued access to the necessary security-related information” the UK could quit Galileo.