The Galileo network, which is due to go live in 2020, received 15 per cent of its £2.3billion cost from the UK.
The system has important military advantages and will deliver encrypted GPS navigation data.
Furious officials inside No10 have expressed outrage the EU now plans to ban the UK from benefiting from Galileo by accusing the country of being a risk to security.
One source told the Sun: “To call us a risk to European security is the ultimate insult.
“No-one has done more to defend Europe’s freedoms than us.”
Another told the FT: “What is being proposed by Brussels is outrageous.”
The European Commission wrote to the Government earlier this year to argue it would be inappropriate to share the highly sensitive information with the UK after it departs the trade bloc.
The letter said: “If the commission shared this information with the UK (which will become a third country) it would irretrievably compromise the integrity of certain elements of these systems for many years after the withdrawal of the UK.”
It is believed the French would benefit most from the UK being excluded.
A source is believed to have noted: “This is being seen as a grab for the lucrative space industry – worth hundreds of millions of pounds to the French.
“But Macron risks looking red-faced with growing numbers of European Defence Chiefs backing the UK position.”
Galileo relies on British territories such as the Falklands to work, meaning the EU’s investment in the project would be dramatically hit if they chose to exclude the UK.
Theresa May and the Defence Secretary Gavin Williamson are believed to be working alongside other senior ministers to ensure the UK’s part in Galileo is not threatened by Brexit.
The revelation of fresh problems in the negotiations with the EU27 comes just one week after David Davis declared that a Brexit deal with Brussels is “closer than ever before”.
Details of Britain’s transition out of the EU were agreed on Friday.
Mr Davis said: “The deal we have struck should give us confidence that a good deal for the United Kingdom and the European Union is closer than ever before.”
Meanwhile, Michel Barnier hailed the agreement as “a decisive step” while warning: “We are not at the end of the road and there is a lot of work still to be done on important subjects.”