How Huawei's leaked involvement in 5G network shows UK out of step with allies on dangers of China
The government is said to be satisfied that the company will only be allowed to build "non-core" parts of the infrastructure, such as antennas, keeping the information passed over it safe.
Digital minister Margot James has dismissed reports that a final decision has been made, saying "in spite of Cabinet leaks to the contrary, final decision yet to be made on managing threats to telecoms infrastructure."
Politicians including Tom Tugendhat, the Conservative chairman of Britain's Foreign Affairs Committee, criticised the reported decision, suggesting that it will make internet users in the UK unsafe.
There is no clear way of deciding whether a part of the infrastructure is "core", he said, because of the way the network is built.
"It still raises concerns," he told BBC Radio 4. "The definition of core and non-core is a very difficult one with 5G.
"5G does change from a faster internet system into an internet system that can genuinely connect everything, and therefore the distinction between non-core and core is much harder to make."
A number of ministers, including home secretary Sajid Javid, foreign secretary Jeremy Hunt, defence secretary Gavin Williamson, international trade secretary Liam Fox and international development secretary Penny Mordaunt were said to have raised concerns about the decision, according to The Daily Telegraph.
The decision comes after a number of senior security figures warned publicly of the risks entailed in allowing a Chinese firm access to the UK's critical communications network.
MI6 chief Alex Younger has said Britain needs to decide how "comfortable" it is in allowing Chinese firms to become involved while the head of GCHQ Jeremy Fleming has spoken of both "opportunities and threats" which they present.
Some critics have expressed concerns that the Chinese government could require the firm to install technological "back doors" to enable it spy on or disable Britain's communications network.
Last month a government-led committee set up to vet Huawei's products said it had found "significant technological issues" with its engineering processes leading to new risks to the UK network.
The decision is likely to further strain relations with the US, which has banned Huawei from government networks and urged others in the Five Eyes intelligence alliance - the UK, Australia, New Zealand and Canada - to do the same.
Huawei has denied having ties to the Chinese government, but critics question how independent any large Chinese company can be, as they are legally obliged to co-operate with state intelligence agencies.
A Department for Digital, Culture, Media and Sport spokeswoman said the security and resilience of the UK's telecoms networks was of "paramount importance".
"As part of our plans to provide world class digital connectivity, including 5G, we have conducted a review of the supply chain to ensure a diverse and secure supply base, now and into the future," the spokeswoman said.
"This is a thorough review into a complex area and will report with its conclusions in due course."
Downing Street refused to comment on the report, which was first published in the Telegraph. A spokeswoman said: "We don't comment on NSC discussions."
Additional reporting by agencies