Huawei is deeply embedded in the critical national infasructure (CNI), and in 2005 won a multi-billion pound contract to supply BT. The Intelligence and Security Committee (ISC) report was highly critical of the manner and extent to which government ministers had been kept informed about this relationship, stating "The Committee was shocked that officials chose not to inform, let alone consult, Ministers on such an issue", adding that it didn't think there had been much improvement since then.
The government's response is that, with hindsight, "we agree that Ministers should have been informed", but it does not accept that there have been no improvements since then. This is the nature of much of the government's reply to the ISC: accepting some criticism, while rejecting others.
However, the key response has been to accept the ISC's criticism over the running of the 'Cell' in Banbury. The Cell is the Cyber Security Evaluation Centre established in Banbury in 2010, as security concerns over Huawei's potential relationship with the Chinese government began to grow (Huawei denies any relationship).
The purpose of the Cell is to examine Huawei hardware and software for security issues. It is reputed to be the only location outside of China that has access to Huawei's source code. The ISC criticized the delays in getting the Cell fully functional, but more specifically it is concerned about the structure – it is funded by Huawei and its staff are therefore technically Huawei employees. "We remain concerned that a Huawei-run Cell is responsible for providing assurance about the security of Huawei products."
The ISC had previously assumed the Cell was run by GCHQ, and consequently recommended "that the National Security Adviser conducts a substantive review of the effectiveness of the Cell as a matter of urgency." The government has now accepted this recommendation. "He will do so and will report to the Prime Minister later in the year," is the response.
It is a delicate balancing act for the government. The US is already clear that Huawei poses a security threat. Huawei denies this. Even though it was founded in 1987 by Ren Zhengfei, a former People's Liberation Army officer, it points out that the company is 98.6% owned by its own employees and has no relationship with the Chinese government. It suggests that concern over its involvement in CNI is more economic than political.
At the time of the ISC report last month, Finance Minister George Osborne commented, "It is a personal priority of mine to increase trade links between the UK and China, and I cannot emphasize enough that the UK is open to Chinese investment." It would seem, however, that the government now accepts that it must be seen to be more proactive over concerns about Huawei.
"We are not complacent," said a Cabinet Office spokesman to the BBC, "and as such we have agreed to the main recommendation of the report to conduct a review of Huawei's Cyber Security Evaluation Centre (the 'Banbury Cell') to give assurance that we have the right measures and processes in place to protect UK telecommunications."