Part of the job of staff at Huawei's Cyber Security Evaluation Center, dubbed the "Cell," is to examine Huawei's technologies for security vulnerabilities and flaws.
But the Intelligence and Security Committee (ISC) said that on the evidence it has seen thus far, "we have not found this argument to be compelling."
It comes at a time when U.S. businesses have been warned off Huawei's telecoms and networking equipment by members of the U.S. House of Representatives, who were left "frustrated" and "unconvinced" by the testimony given by Huawei's top executives, along with rival Chinese firm ZTE.
The allegations made by U.S. politicians highlighted that Huawei founder Ren Zhengfei was a member of the People's Liberation Army.
Other allegations made suggested that Huawei includes backdoors and other deliberate vulnerabilities to allow the Chinese government to conduct espionage on foreign networks.
Huawei strenuously denied the allegations. According to the BBC, a company spokesperson said it is 98.6 percent owned by its employees.
"While we recognise that there are some benefits associated with the current staffing arrangements for the Cell, these do not, in our opinion, outweigh the risks of Huawei effectively policing themselves," the report said.
The ISC noted the 22 people employed at the Cell are all U.K. nationals, and either ex-Government staff, industry experts or recent graduates. But the committee said that GCHQ should be formally tasked to provide audit and validate the work conducted by the staff at the cybersecurity center.
The cross-party group of politicians also said the U.K. government should be involved in the selection of staff to ensure "continued confidence" in the center.
Zhengfei last year plowed $2 billion (£1.3bn) in the U.K. economy, specifically in research and development. The telco's equipment maker's founder also said his company would double its U.K. employee base in the country over the next five years.