The recommendation from the National Cyber Security Centre is said to have come after a review of "5G" mobile technology and the potential risks it poses.
The UK's mobile and internet providers are already heavily reliant on Huawei for their networks, but the USA has argued newer 5G networks are more complex and using the Chinese company's kit poses an unacceptable risk.
Growing U.S. pressure on allies to shun Huawei Technologies Ltd., China's first global tech brand, increasingly threatens its access to global markets for next-generation telecoms technology. He accused the United States of using "political means" to interfere in economic activity, "which is hypocritical, immoral and unfair bullying".
And the finding would "carry great weight" with European leaders, the newspaper reported. Huawei strongly denies claims its equipment can be used for spying.
The company has said it is open to supervision from the European Union if it helps assure governments, and has openly invited concerned stakeholders to come and see for themselves what Huawei is and isn't doing.
Still, three of Canada's partners in the Five Eyes intelligence-sharing group - the United States, Australia and New Zealand - have forbidden the use of Huawei products in 5G network development, though the US ban is limited to government agencies - at least for now.
Huawei is the world's No. 1 telecom supplier and No. 2 smartphone maker.
Alex Younger, head of MI6, the United Kingdom secret intelligence service, also indicated that Britain would not ban Huawei. The U.S. has accused her of fraud and violating worldwide sanctions against Iran, which she and Huawei have both denied.
Huawei Chief Financial Officer Meng Wanzhou was arrested in Canada in December and faces possible extradition to the US.
"China has not and will not require companies or individuals to collect or provide foreign countries' information for the Chinese government by installing backdoors or other actions that violate local laws", said Geng.
Despite the controversy and the USA ban, there hasn't been any publicly available evidence that Huawei has ever spied on the Chinese government.
Huawei did not respond to requests for comment on Sunday.
'We have set out the improvements we expect the company to make.