British firms prepare to take tea with Gaddafi

Ministers are preparing a diplomatic push to persuade Libya to hand over a series of multi-billion-pound construction contracts to British companies.

Still regarded by America as a member of the "axis of evil", Libya is about to embark on a huge reconstruction programme funded by money from its oil industry.

UK Trade & Investment, a unit of the Department of Trade and Industry, has drawn up a shortlist of sectors where British companies could have a good chance of winning large contracts, and is planning a series of trade missions in Libya over the next year.

The areas include airports, shipping, railways, health care and education.

Construction companies Balfour Beatty and Amec have already expressed an interest in working in Libya.

The trade push follows the thawing of relations between Libya and Britain. The Libyan leader Colonel Muammar Gaddafi indicated last year that he would abandon his quest for weapons of mass destruction.

Abdul Rahman Mohammed Shalgam, Libya's foreign minister, met his British counterpart, Jack Straw, in London earlier this month. Tony Blair is expected to visit Libya later this year to meet Col Gaddafi.

America has a trade embargo with Libya as it considers the country to be a state sponsor of terrorism. As a result, British companies would not face any competition for the contracts from US construction companies.

Mike O'Brien, the trade and foreign affairs minister, said: "We are examining ways in which we can bring together British businesses and the fledgling Libyan business support organisations.

"The country's oil and gas reserves are known to be enormous. But opportunities exist across a wide range of other sectors. The business climate in the country remains difficult but what is clear is that there is an identifiable sense of enthusiasm on the part of Tripoli to make things happen, particularly in the wake of Col Gaddafi's announcement."

The DTI has already discussed two Libyan rail projects with British firms. One, a passenger route, would run along the coast, linking the Tunisian border with Tripoli. The other, a freight route, would run north-south though Libya. It is understood that Balfour Beatty is interested in the projects.