"While entities from across the Gulf and Iran have been guilty of advancing extremism, those in Saudi Arabia are undoubtedly at the top of the list," Tom Wilson, a fellow at the Henry Jackson Society, said in a report on Wednesday.
According to the London-based foreign policy think-tank, Saudi Arabia operates several large charities that fund education involved with their ideologies worldwide, including in Britain, spending at least 67 billion pounds ($87bn) on the programmes over the past 50 years.
Funding from Saudi Arabia has primarily taken the form of endowments to mosques, the report said, which have in turn "played host to extremist preachers and the distribution of extremist literature".
The report also flagged that some of Britain's most serious hate preachers have "studied in Saudi Arabia as part of scholarship programmes".
In a statement to the BBC, the Saudi embassy in London said the claims were "categorically false".
"We do not and will not condone the actions or ideology of violent extremism and we will not rest until these deviants and their organisations are destroyed," it added.
Call for new laws
The Henry Jackson Society called for the creation of new laws requiring mosques and other institutions to declare foreign funding.
It also demanded the launch of a public inquiry into foreign funding of hardline groups, putting pressure on the government.
The release of the think-tank's study comes amid pressure on Prime Minister Theresa May to publish an apparently delayed government report examining the role of Saudi Arabia and other nations in encouraging "extremism" in Britain. The report reportedly criticises Saudi Arabia.
The UK is one of the top suppliers of arms to Saudi Arabia with successive governments, both Labour and Conservative, signing major arms deals with the kingdom.
In the past three years, the UK has approved arms export licences to Saudi Arabia worth $4.7bn.
Source: Al Jazeera and news agencies