British business will be issued with an unprecedented corruption health warning on Friday by leading industrialised nations angry at London’s failure to combat corporate foreign bribery, the Financial Times has learned.

The proposals will be part of a stinging attack by the anti-bribery group of the Organisation for Economic Co-operation and Development, following outrage over Britain’s handling of an abortive investigation into BAE Systems’ Saudi Arabian arms deals and other cases of suspected corruption. The OECD group will warn that companies doing business with Britain risk legal and reputational damage because of the lax anti-bribery law and enforcement, people briefed on the discussions say.

The action highlights the rising cost of London’s failure to bring bribery prosecutions against its multinationals when other European countries and the US are pursuing their companies.

The 37-member anti-bribery group will recommend that companies take extra care in dealings with their British counterparts because of the risk of becoming entangled in corruption, people briefed on the talks say.

The unusually strong warning echoes the language of an edict issued against Iranian financial institutions by the international Financial Action Task Force on money laundering, which has close ties to the OECD and is also based in Paris.

The OECD anti-bribery group will issue the warning as it unveils the results of an investigation into Britain launched last year, following an international outcry over London’s decision in December 2006 to halt the BAE-Saudi probe. The group has quizzed British government officials from at least three ministries and the Serious Fraud Office.

The OECD’s conclusions will echo a stern letter the anti-bribery group wrote to ministers over the summer, attacking Britain over its failure to bring a single overseas bribery case or to deliver on a years-old pledge to update its anti-corruption laws. The group will also raise concerns that the Serious Fraud Office plans to downgrade its commitment to tackling overseas bribery, focusing instead on public education and consumer crimes such as share scams.

Britain has insisted it is making progress in tackling bribery, pointing to proposed legal reforms due to be published next month and last month’s first successful prosecution by a new City of London police overseas corruption unit.

The SFO announced a landmark deal this month under which Balfour Beatty, the construction group, admitted breaching the 1985 Companies Act and paid a £2.25m ($3.9m) forfeit to end an investigation into suspected bribery in its work on the $130m (€97m, £75m) reimagining of Alexandria’s lost ancient library in Egypt. But some lawyers say the case has sent out bad signals, suggesting companies can buy their way out of trouble at minimal cost and avoid being prosecuted for corruption offences by confessing instead to less serious technical breaches of the law.

The Department for Business, Enterprise and Regulatory Reform said it was “committed to stamping out corruption and bribery” and would consider the OECD group’s recommendations carefully. The group’s report will be a tough baptism for Jack Straw, the justice secretary, who this week was appointed the government’s third anti-corruption champion in three years.

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