Divisions are emerging within the EU over the European commission’s decision to exclude the UK from the bloc’s new satellite navigation system , Galileo.

A number of member states are said by sources in Brussels to have become sympathetic to the British cause regarding the handling of the issue by EU officials.

The commission decided last year to exclude Britain and its companies from sensitive future work on the Galileo satellite project without warning, in what EU sources have described as a “peremptory manner”.

Galileo is the £8bn EU rival to the global positioning system (GPS) developed and controlled by the US. The system, which will have both civil and military uses, was commissioned in 2003 and is due for completion by 2020.

The UK is claiming, according to a leaked government paper tabled this week in the negotiations in Brussels, that blocking British companies from the project will add €1bn (£880m) in costs and threaten security on both sides of the channel. It further claims that stopping British involvement during the transition period is a breach of the joint report agreed in December between the commission and the UK.

The UK is now threatening to demand the return of more than €1bn of its contributions to EU space research unless Brussels backtracks.

“An end to close UK participation will be to the detriment of Europe’s prosperity and security and could result in delays and additional costs to the programme”, the leaked UK technical note says. “Should the UK’s future access be restricted, the UK’s past contribution to the financing of space assets should be discussed.”

The commission’s decision itself is said to be an issue for some member states, but the manner in which the UK has been treated has generally raised eyebrows.

When the UK’s ambassador to the EU, Tim Barrow, was said to have sent a letter expressing his concerns over the block on UK firms, he was not given the courtesy of a response. He later received an apology as the letter had been lost by the European commission.

The commission’s claim that the UK, as a “third country” after it leaves the EU, cannot be trusted with sensitive material related to the project has infuriated the government. The foreign secretary, Boris Johnson, raised concerns over the issue last week with his French counterpart.

It has been reported that French officials have now raised their concerns with the commission over the decision to block UK involvement with the encrypted navigation system after Brexit.

The French government, while generally hostile to the UK’s demands for preferential treatment once it leaves the bloc, is anxious to keep the UK in a tight relationship in relation to security. According to the Times, the concerns in Paris are shared by Spain, Sweden, the Netherlands and the Baltic states.

Earlier this month the chancellor, Philip Hammond, who is giving a speech in Brussels on Thursday, was said to want to sabotage the EU’s satellite navigation project by attempting to disrupt the transfer of sensitive encryption technology from Britain. It has also been suggested that the UK could launch its own £5bn rival system unless the EU backtracks.

Meanwhile, UK negotiators in Brussels have further warned of significant economic and security dangers for Europe  if the EU does not grant a special deal on data-sharing laws after Brexit. In an appeal for immediate talks on the issue, a government presentation given to Michel Barnier’s EU team on Tuesday demanded a seat on the body that applies data laws on companies, and has insisted that it should be given preferential treatment over other non-EU countries after Brexit.

EU businesses in sectors ranging from finance to telecommunications that are reliant on current data-sharing arrangements earned €36bn from the UK in 2016, British officials said.

In the same year, 13,000 requests from EU member states for information about criminal convictions of UK nationals received a response. Britain issued 35,000 notifications regarding EU nationals being convicted in the UK.

The UK’s presentation said: “The continued, uninterrupted and secure flow of personal data between the EU and UK is vital for all partners.”

By Daniel Boffey in Brussels