Ministers are in "urgent talks" with the European Commission over a decision to exclude UK cities from entering the European Capital of Culture.
First Secretary of State Damian Green told MPs that the decision was "extremely disappointing".
Five different UK bids were competing to host the 2023 European Capital of Culture, spending hundreds of thousands of pounds on their entries.
Nottingham, Leeds, Milton Keynes, Dundee and a joint Belfast-Londonderry-Strabane bid were all in the running for the accolade - which has the potential to provide a significant economic boost.
During Prime Minister's Questions, SNP MP Patrick Grady (Glasgow North) asked whether it was a sign "the sun was setting on Empire 2.0".
He said: "The United Kingdom has lost its seat on in court of justice, EU agencies are pulling out of London an they'll be no be more European Capitals of Culture in the UK.
"Is the sun setting on Empire 2.0 before its even begun?"
Mr Green responded saying: "It's not surprising really that EU institutions are not going to be in a state that is not a member of the EU, that can't come as a surprise to him.
"On the capitals of culture I rather agree with him, I think its extremely disappointing that after they'd let British cities ask to apply to be part of the process, the commission decided that they couldn't.
"We are in urgent talks with the commission about that and in particular we're making sure that all those cities who applied can continue with their cultural development - because cultural development has been shown to be an extremely good basis for the regeneration of cities and town across the United Kingdom."
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