Adds background, shares, and details from Apple statement in paragraphs 3-7, 10, 13

By Aditya Soni and Stephen Nellis

Feb 21 (Reuters) - Apple AAPL.O is dropping its most advanced, end-to-end security encryption feature for cloud data in the UK, the company said on Friday, an unprecedented move after reports that the government demanded a way to access user data.

Advanced Data Protection, an optional feature that extends end-to-end encryption to a wide range of user data, is no longer available in the UK for new users and current UK users will eventually need to disable this security feature, Apple said.

Governments and tech giants have long been locked in a battle over encryption, but such a demand from Britain would be particularly sweeping. Security officials argue that encryption hinders criminal investigations, while tech firms defend it as essential to user privacy.

The loss of end-to-end encryption for iCloud backup means Apple would be able in some instances to read user data such as iMessages that would otherwise be protected and pass it on to authorities if legally compelled. In contrast, if a user has end-to-end encryption, Apple cannot read the data under any circumstances.

Data that was encrypted before Apple offered its protection service in December 2022, such as health data, passwords and iMessage and FaceTime messaging services, will remain encrypted, Apple said.

Law enforcement agencies have frequently targeted those services through iCloud backups, which were not end-to-end encrypted before Apple offered Advanced Data Protection. Those backups - which can contain photos and other sensitive information and are widely used - can no longer be end-to-end encrypted for UK users, Apple said.

Because Apple does not possess the encryption keys of existing users of its data protection service in the UK, Apple said it will not be able to turn off the features for those users. Apple said it will offer those users a chance to turn it off themselves.

A spokesperson for Britain's Home Office declined to comment on whether such an order had been issued. "We do not comment on operational matters, including for example confirming or denying the existence of any such notices," the spokesperson said.

Apple said it "was gravely disappointed that the protections provided by ADP will not be available to our customers in the UK given the continuing rise of data breaches and other threats to customer privacy."

Apple shares were largely unchanged on Friday late morning.

Apple has long resisted government efforts to weaken encryption, including in 2016 when U.S. authorities tried to compel it to unlock the iPhone of a San Bernardino shooter.

The company reiterated on Friday that it would "never build a backdoor into its technology."

Other tech firms have grappled with global encryption laws. Messaging platform Signal has previously threatened to leave the UK over similar concerns, while Meta Platforms META.O has faced pushback over its plans to expand encryption on WhatsApp.

(Additional reporting by Arsheeya Bajwa And Zaheer Kachwala in Bengaluru; Editing by Sayantani Ghosh and Peter Henderson)

((ArsheeyaSingh.Bajwa@thomsonreuters.com; +91 8510015800;))