The search for a "faux fur" alternative to make bearskin helmets for the Guards regiments has so far proved fruitless, says the Ministry of Defence.
The Guards have worn bearskins since 1815
Armed Forces minister Adam Ingram said an "unsatisfactory performance" in wet weather conditions were among problems.
The MoD has been testing material provided by People for the Ethical Treatment of Animals (Peta), which says there is "no excuse" to use real fur.
Between 2001 and 2005 about £321,100 was spent on 494 traditional bearskins.
Mr Ingram gave the information to MPs in a Commons Written Reply.
He said there had been a number of contracts with commercial firms to develop a replacement for the bearskins, headwear costing around £650 each, but one had not yet been found.
The MoD was continuing to work with Peta and all parties were taking the search for an alternative "very seriously", he added.
An MoD spokesman added the search had been going on for a number of years, but synthetic alternatives had not shown the same "quality".
"If it rained too much the faux fur has absorbed water, making the caps much too heavy for the wearer, and quite a substantial health risk," he said.
"Another problem has been they appear out of shape and as they are mainly used on parade it would be unacceptable for a guardsman to appear in shapeless head gear."
Peta claims the use of real fur is contributing to the slaughter of black bears in Canada.
Around 70 Peta protesters campaigned in central London
The MoD refutes this claim and says the bears are routinely culled and none have been killed because of an order for bearskins from the Army.
However, Peta campaign co-ordinator Anita Singh said the MoD was helping to encourage the killing of the bears by licensed hunters.
Last month, Peta activists staged a naked protest, most wearing only bear masks, against the use of real fur for the helmets.
Ms Singh said: "In the 21st century, when the MoD can make the best military equipment in the world, it can surely find a synthetic material to make ceremonial headwear".
She said there was "intense pressure" on the MoD from MPs and the UK public which opposed the use of real fur.
She added Peta had now provided a new material exactly meeting MoD specifications and was "hopeful" it would be suitable.
The towering black hats were first worn in 1815 in recognition of the defeat at Waterloo of Napoleon's French Imperial Guard, who also wore bearskins.