China's Huawei has been allowed to acquire the Centre for Integrated Photonics (CIP), the UK's world-leading photonics research laboratory, for an undisclosed sum.

The optical networking research unit is currently owned by the East of England Development Agency (EEDA), but is being sold as part of a larger rationalisation of assets. The cash-strapped British government is axing all UK regional development agencies by this March, to save money.

Huawei said CIP will "significantly deepen" its optical research and development capabilities. The CIP research team, located in Ipswich, will be retained and will form the core of a new Huawei UK R&D centre, part of Huawei’s global network, according to the firm.

CIP has a reputation as a world-class incubator in fibre optic transmission systems, and carries out cutting edge research work in this high tech area. Telecom operators BT and Virgin are investing significantly in converting their national broadband networks to fibre optic-based delivery systems.

EEDA’s chairman, professor Will Pope, said: "Following re-structuring and investment in the business we’re very pleased to find such a prominent acquirer for the company where the skills of the staff and the accumulated know-how are to be exploited on an international scale."

The fact that a taxpayer-funded leading research business has fallen into foreign hands may raise eyebrows in some quarters, particularly as CIP is a research leader in the rapidly growing optical networking sector.

Pope said the deal with Huawei followed a "rigorous and competitive tender process which has generated a positive return for the taxpayer".

Victor Zhang, CEO of Huawei UK, said: "Currently, Huawei has six research facilities in Europe. I’m confident that CIP’s strong research abilities and its talented staff will further extend our European research presence to the UK."

Last year Huawei won a racial discrimination case in the UK, following an investigation by the Southampton Employment Tribunal. Fibre optics specialist Judeson Peter, who was made redundant from the company’s Basingstoke office, claimed he had lost his job because he was British.