LONDON - Finance minister Philip Hammond on Tuesday warned Britain will "strike back" against states hacking into strategic networks in order to avoid a military showdown, as part of a new cyber-defence plan.

Unveiling the £1.9 billion ($2.3 billion, 2.1 billion euro) National Cyber Security Strategy, Hammond said hackers were trying to capitalise on the increasing connectivity of devices to target homes, cars, air traffic control networks and power grids.

"A small number of hostile foreign actors have developed and deployed offensive cyber-capabilities. These capabilities threaten the security of the UK's critical national infrastructure," he said at the London launch.

"If we do not have the ability to respond in cyber-space... we would be left with the impossible choice of turning the other cheek and ignoring the devastating consequences or resorting to a military response. "We will not only defend ourselves in cyber-space, we will strike back in kind when we are attacked," he added.

The finance ministry earlier called on businesses to "up their game" in the fight against cyber-crime, with Hammond adding that "government can't deliver innovation - that's something that only businesses and entrepreneurs can do".

However, he promised that the government would take "a more active cyber-defence role" to "block, disrupt an neutralise malicious activity... and make Britain to be the best place in the world to be a tech business".

The funding will try to reduce the impact of cyber-attacks and stop viruses and spam emails reaching strategic targets.

Hammond said the government would strength law enforcement capabilities in a bid to deter would-be hackers and announced a new Cyber Security Research Institute to improve the security of smartphones, tablets and laptops. "We must now keep up with the scale and pace of the threats we face," said Hammond.

"Our new strategy, underpinned by £1.9 billion of support over five years and excellent partnerships with industry and academia, will allow us to take even greater steps to defend ourselves in cyber-space and to strike back when we are attacked."

Meanwhile, Russia is pushing its foreign policy in increasingly aggressive ways including cyber-attacks and espionage, posing a growing threat to Britain and the rest of Europe, the head of Britain's internal intelligence agency MI5 has said.

As finance minister Philip Hammond unveiled the country's new five-year cyber security strategy and hinted at threats from Russia in a speech, the Kremlin dismissed the allegations as untrue and challenged its critics to produce evidence.

MI5 Director General Andrew Parker said Russia had been a covert threat for decades, but what differed now from the Cold War era was that there were more and more methods available for it to pursue its anti-Western agenda.

"Russia increasingly seems to define itself by opposition to the West and seems to act accordingly," he told the Guardian newspaper in an interview published on Tuesday.

"It is using its whole range of state organs and powers to push its foreign policy abroad in increasingly aggressive ways, involving propaganda, espionage, subversion and cyber-attacks. Russia is at work across Europe and in the UK today."

Kremlin spokesman Dmitry Peskov told reporters that Parker's words "do not correspond to reality"."Until someone produces proof, we will consider those statements unfounded and groundless," he said.

Meanwhile, the Kremlin on Tuesday dismissed as baseless claims by a British intelligence agency chief that Russia is acting in "increasingly aggressive ways" and using new technologies against the West.

Kremlin spokesman Dmitry Peskov told reporters Tuesday that Russia "could not agree" with Parker's claims.  "We have repeatedly commented on cyber-attacks: as long as someone does not provide evidence, any statements - be they by the head of MI5, the president of the United States and other decision-makers - we will consider unfounded and baseless," Peskov said. "We cannot take any of these unfounded allegations into account."