* Ex-MI6 spymaster: Huawei threatens security
* United States blacklists Huawei
* UK still reviewing 5G decision - May's spokesman
* Huawei expects British decision based on fact (Adds PM May's spokesman, Huawei statement)
By Guy Faulconbridge and Paul Sandle
LONDON, May 16 (Reuters) - China's Huawei poses such a grave security risk to the United Kingdom that the government must not allow it to have even a limited role in building 5G networks, a former head of Britain's MI6 foreign spy service said on Thursday.
In what some have compared to the Cold War arms race, the United States is worried that 5G dominance would give any global competitor such as China an advantage Washington is not ready to accept.
The Trump administration, which hit Huawei with severe sanctions on Wednesday, has told allies not to use its technology because of fears it could be a vehicle for Chinese spying. Huawei has repeatedly denied this.
But British ministers have discussed allowing Huawei a restricted role in building parts of its 5G network. The final decision has not yet been published.
"I very much hope there is time for the UK government, and the probability as I write of a new prime minister, to reconsider the Huawei decision," said Richard Dearlove, who was chief of the Secret Intelligence Service from 1996 to 2004.
"The ability to control communications and the data that flows through its channels will be the route to exercise power over societies and other nations," Dearlove wrote in the foreword to a report on Huawei by the Henry Jackson Society.
Huawei, founded in 1987 by a former engineer in China's People's Liberation Army, denies it spies for Beijing, says it complies with the law and that the United States is trying to smear it because Western companies are falling behind.
U.S. Secretary of State Mike Pompeo told Britain on a visit this month that it needed to change its attitude towards China and Huawei, casting the world's second largest economy as a threat to the West similar to that once posed by the Soviet Union.
Asked whether the government would reconsider its stance on Huawei, Prime Minister Theresa May's spokesman said: "As you know, in relation to Huawei, we are reviewing the right policy approach for 5G and when an announcement is ready the culture secretary will update parliament."
Huawei said the Henry Jackson Society was short on facts and misunderstood modern China and the nature of 5G.
"The isolationist approach they recommend may support an America first trade agenda but it's hard to see how it's in UK's national interest," Huawei said, adding it was an independent company which took no instructions from Beijing.
"We hope and expect that any decision on Huawei's participation in Britain's build-out of 5G networks will be based on solid evidence, rather than on unfounded speculation and groundless accusations," it said.
Dearlove, who spent 38 years in British intelligence, said it was deeply worrying that the British government "appears to have decided to place the development of some its most sensitive critical infrastructure" in the hands of a Chinese company.
"No part of the Communist Chinese state is ultimately able to operate free of the control exercised by its Communist Party leadership," said Dearlove.
"We should also not be influenced by the threat of the economic cost of either delaying 5G or having to settle for a less capable and more expensive provider," he said. (Reporting by Guy Faulconbridge; Editing by Andrew MacAskill and Mark Potter)