In a statement on Tuesday, Shapps said the breach had been in a third-party payroll system which contained the details of about 272,000 serving personnel and recent veterans.

Shapps said a probe was going on into the failings of SSCL, the contractor in question, which claims to be "the largest provider of critical business support services for government".

SSCL was set up as a joint venture between the British Government and a private technology firm. The government sold its last 25% stake last year. SSCL clients also include the Home Office, Cabinet Office and Ministry of Justice.

In March, Britain and the US claimed attackers aligned to the Chinese Government had targeted American officials, journalists, corporations, pro-democracy activists and the UK’s election watchdog in a campaign of “malicious” cyber attacks.

The two countries imposed sanctions on several individuals and the US charged seven alleged attackers, all believed to be living in China and part of a group known as APT31.

Shapps said "...for reasons of national security we cannot release further details of the suspected cyber activity behind this incident".

"However, I can confirm to the House that we do have indications that this was the suspected work of a malign actor and we cannot rule out state involvement.

"This incident is further proof that the UK is facing rising and evolving threats and, as I set out in my speech at Lancaster House in January, the world is, I’m afraid, becoming somewhat more dangerous."

Sky News in the UK and the BBC have claimed that China was behind the breach.

Asked about the breach during the daily Chinese foreign ministry media conference, spokesman Lin Jian said: "The UK politicians’ accusation is purely unfounded.

"China firmly opposes and fights all forms of cyber attacks. We also firmly reject using the cyber security issue politically to smear and vilify other countries."

Shapps said, "although this incident is entirely unrelated to our own MOD [Ministry of Defence] networks, we are also reviewing all personnel data to ensure our people’s data is secure.

"This was the work of a malign actor who compromised a contractor-run network, entirely separate from the MOD core system.

"However, as I’ve said, we cannot at this stage rule out state involvement from elsewhere."