Philip Hammond added that hostile “foreign actors” were developing techniques that threaten the country’s electrical grid and airports.
The warning came within a speech describing how the government plans to spend a previously announced £1.9bn sum on cybersecurity.
It also addressed ways to tackle cyber-scammers and defend businesses.
“If we do not have the ability to respond in cyberspace to an attack which takes down our power network – leaving us in darkness or hits our air traffic control system grounding our planes – we would be left with the impossible choice of turning the other cheek, ignoring the devastating consequences, or resorting to a military response,” Mr Hammond said as he described the National Cyber Security Strategy in London.
“That is a choice we do not want to face and a choice we do not want to leave as a legacy to our successors.
The strategy will help enlarge specialist police units that tackle organised online gangs.
In addition, some cash will also go towards education and training of cybersecurity experts.
“If we want Britain to be the best place in the world to be a tech business then it is also crucial that Britain is a safe place to do the digital business,” the chancellor added.
“Trust in the internet and the infrastructure on which it relies is fundamental to our economic future.”
Mr Hammond’s speech followed a warning from MI5 that Russia poses an increased cyber-threat.
“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,” Andrew Parker, the domestic security agency’s director general, told the Guardian.
The Kremlin has dismissed the allegation.
“Until someone produces proof, we will consider those statements unfounded and groundless,” said spokesman Dmitry Peskov.
Source: BBC News – http://www.bbc.co.uk/news/technology-37821867