The research, taking place in the Department of Cancer Studies at the university's medical school, involved putting cancer-causing genes into a virus similar to the one that causes the common cold. Inspectors from the Health and Safety Executive were concerned that arrangements to contain the viruses might not be adequate.
Although the chances of an accident were small, a virus genetically modified in that way could infect workers in the laboratory and trigger cancer or, if it escaped entirely, put the public at risk.
This is the first time such tough action has been taken by the executive since regulations covering genetic engineering came in in 1992. The university's safety procedures will be reviewed by the Government's Advisory Committee on Genetic Manipulation.
Last week, the executive served a formal 'improvement notice' on the university, giving it until 7 April to review the safety of all work being done in the Department of Cancer Studies.
In December, Professor Phillip Gallimore, of the Department of Cancer Studies, and the university itself were served with a 'prohibition notice', stopping the research immediately.
According to an executive spokesman, 'the inspector had fears that the level of containment (of the viruses) was not appropriate to the degree of risk. A prohibition notice is issued where the inspector believes there is, or will be, a risk of serious personal injury. An improvement notice requires employers to take remedial action on specific breaches of the law within a specified time limit.'
Although many large companies routinely use genetic engineering, one regulator said that industry was 'squeaky clean' compared with academia. Nearly four years ago, Professor John Beringer, who heads a government advisory committee on the safety of genetic engineering, predicted that university laboratories would be the most troublesome to police for safety.
In 1978, Janet Parker, who worked at the university, died after a smallpox virus escaped from another laboratory there.
Professor David Westbury, Vice-Principal of Birmingham University, said last night: 'Even though research on cancer is a vitally important area of medical research, safety has to be our over-riding concern. We have already taken action in response to the requirements of the HSE and we shall continue to work with the inspectors until they are satisfied.'
According to David Harrison, the university's safety officer, the researchers, funded by the Cancer Research Campaign, wanted to isolate oncogenes - those implicated in causing cancer - and insert them in human cells which they had cultured in the laboratory. By studying the effect of the new gene, they hope to gain a better understanding of the mechanisms that cause cancer.
The researchers used adenoviruses as the vehicle to transfer the genes. The best known member of the adenovirus family is that which causes the common cold.
As an additional safety measure, researchers had altered the virus so that it could not replicate inside the cells which it infected, said Mr Harrison. He emphasised that research safety had been reviewed within the university: 'All of our genetic modification work had gone through a committee and had been carefully considered.'
Britain acted early to ensure the safety of genetic engineering and its regulations have been taken as a model by other countries.
However, a House of Lords select committee has recommended that some regulations should be scrapped, claiming they are too heavy a bureaucratic burden for Britain's fledgling biotechnology industry.
Larger companies maintain that safety has to be an integral part of any successful industry and that commercial goals do not conflict with that.
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