Brussels' decision to exclude the UK from the Galileo satellite-navigation system is "completely unacceptable", Defence Minister Guto Bebb has told MPs.
The European Commission has said the UK cannot immediately have access to the system, intended for use by government agencies, armed forces and emergency services, after Brexit because it will become a foreign entity.
Mr Bebb revealed that the Government was now looking at the possibility of developing an independent system.
He said: "We are now having to look extremely carefully at the possibility of developing our own options, but I would stress again that this Government would prefer to remain involved with the Galileo project.
"I think this is really a case of the European Union doing damage to themselves."
Tory former minister Sir Desmond Swayne told his frontbench "I hope we're planning to get even" to which Mr Bebb said:
"I can understand his frustration and I say again I do genuinely feel the exclusion of the UK on the basis of what I consider to be a false security case is unacceptable, but this is not about getting even, it is about doing the right thing for the industry and doing the right thing for our defence capabilities."
"I think the frustration for ministers in many ways is that the discussions that we have had with bilateral counterparts in Europe have invariably been positive, but it seems as if the European Commission sees this as a negotiating tactic."
He said it was a "shame" the European Commission does not share the same "goodwill".
Labour Brexit committee chairman Hilary Benn said the suggestion the UK could suddenly become a security risk was "insulting".
He asked whether Mr Bebb shared the concern that some manufacturing capacity on space and satellites could move from the UK to the EU.
The minister replied: "Of course there would be concern, but the key thing is that we have to respond to those concerns which is why various departments of Government including defence have been in constant communication with the defence sector."
Mr Bebb was also asked by Tory Dame Cheryl Gillan about the cost of Britain building its own GPS system.
He said it was "too early for us to highlight the actual cost", but added:
"The cost involved would be no greater than our current contribution to the Galileo project."
Mr Bebb also told the Commons he was confident the Prime Minister would raise the issue at NATO.
"I have no doubt that the defence department will ensure that our representations are made to the Prime Minister and I am absolutely confident that the Prime Minister will be raising these issues at the NATO conference and at further meetings with the European Union."