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British companies may be frozen out of the European space industry after Brexit, the European Commission says, citing security concerns.

The UK's involvement in the Galileo project, which aims to build a European rival to the American GPS system, will have to be "readjusted", it added.

British firms have already contributed to Galileo and may lose future work.

UK ministers oppose the commission's view and want the country to remain involved in "all aspects" of the work.

According to the Financial Times, Defence Secretary Gavin Williamson was furious when he was informed of the move, which could mean the UK armed forces being excluded from the new GPS system.

The newspaper also reports that the Ministry of Defence has looked at the possibility of the UK launching its own system if it is excluded from Galileo.

During a visit to Estonia, Mr Williamson said the commission's approach was "deeply disappointing".

He said the decision "not only will be detrimental to Britain but will also be highly detrimental to European security".

"I very much hope the EU Commission will take the opportunity to see sense, recalibrate its position and not play politics on something that is so vitally important," Mr Williamson said.

The Financial Times describes the issue as "highly charged politically" because French companies are expected to benefit from the UK's proposed exclusion.

The Financial Times reports that in its letter to the UK government, the European Commission said security elements of the GPS project needed to be protected to avoid them being "irretrievably compromised" for several years by being shared with the UK, which will be a "third party" after Brexit.

Commission spokesman Alexander Winterstein said it was "the right time to start thinking about adjusting co-operation" on Galileo because the the UK becomes a "third country" - ie no longer a member of the EU - on 29 March, 2019.

British company SSTL, which assembles the timing and navigation payloads on the spacecraft at its Surrey factory, is unlikely to have completed its share of the production effort by that date.

Greg Clark, the business secretary, said British involvement in Galileo should continue as part of the hoped-for "deep and special partnership" being negotiated with the EU.

"The UK has a world-leading space sector that has contributed a significant amount of specialist expertise to the Galileo programme," he said, emphasising its importance to European security.