Top UK security officials say they can only provide "limited assurance" that telecom equipment provided by Huawei poses no threat to national security.
The Chinese company, which sells smartphones and telecommunications equipment around the world, is monitored in the United Kingdom by a government oversight panel called the Huawei Cyber Security Evaluation Centre.
In an annual report published on Thursday, the panel warned that "shortcomings in Huawei's engineering processes have exposed new risks in the UK telecommunication networks."
"The Oversight Board can provide only limited assurance that any risks to UK national security from Huawei's involvement in the UK's critical networks have been sufficiently mitigated," it added.
Huawei has repeatedly come under fire from lawmakers and government officials in the United States who accuse it of working under the influence of the Chinese government.
The company has repeatedly denied that its products pose security risks, but it has remained largely shut out of the US market. It insists it's a private company owned by its employees.
A spokesperson for Huawei said Thursday that the company "welcomes" the UK report.
"We are grateful for this feedback and committed to addressing these issues," the spokesperson said in a statement. "Cyber security remains Huawei's top priority, and we will continue to actively improve our engineering processes and risk management systems."
The Huawei Cyber Security Evaluation Centre was established in 2010 to mitigate risks arising from Huawei's involvement in UK national security infrastructure. It is chaired by Ciaran Martin, the CEO of the UK National Cyber Security Centre.
A spokesperson for the National Cyber Security Centre said Thursday that it was "fully committed to the oversight arrangements" regarding Huawei.
"This government and British telecoms operators work with Huawei at home and abroad to ensure the United Kingdom can continue to benefit from new technology while managing cyber security risks," the spokesperson said.
The National Cyber Security Centre is part of Britain's Government Communications Headquarters (GCHQ) spy agency.
Previous annual reports from the oversight panel had concluded that risks related to Huawei had been "sufficiently mitigated."