Saudi sources maintained that an agreement with BAE Systems to spend £10 billion on British made fighter jets can still be reached despite growing speculation about the collapse of the deal.

Reports last night suggested that Saudia Arabia has given Britain ten days to halt a fraud investigation into the country’s arms trade or lose the £10 billion Eurofighter Typhoon contract with Europe’s largest defence company.

It is said to be threatening to give the contract to a French rival and to have opened negotiations to aquire Rafale jets.

The Saudi royal family is thought to be angered by a continuing investigation by the Serious Fraud Office (SFO) into allegations that BAE set up a £60 million slush fund to bribe members of the family. The investigation started three years ago and a completion date has not been given.

Last night BAE refused to be drawn on the growing speculation about the loss of the contract. A spokesman said: “Our position on this it that this is an ongoing criminal investigation and for that reason it is not possible for us to comment.”

However, Mike Turner, the group’s chief executive, is believed to be keen for the SFO investigation to reach a close.

Senior Saudi sources have conceded that talks over the purchase of 72 Eurofighter Typhoon jets have been “delayed”. They say that certain “issues” need resolving before a deal can be completed. However they also maintain that the situation is not yet at a crisis point.

The British Government said almost a year ago that Saudi Arabia would buy 72 jets to replace Tornado aircraft that the Kingdom had bought from BAE as long as 20 years ago. In total, BAE has sold about 50 Hawks, 50 Pilatus jets and 150 Tornadoes to the Saudis in a long relationship that includes providing training facilities and support.

On Wednesday, Swiss authorities said they were co-operating with British investigators in the inquiry into BAE Systems. “The Swiss Federal Prosecutor confirms the execution of a British request for legal assistance in connection with BAE Systems,” the prosecutor’s office said in a statement.

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