"The occupation of Iraq has allowed British mercenaries to reap huge profits.

Sunni attacks may delay US handoverBaghdad blast kills 41;

'Mercenaries' to fill departing UK ranks.

How can Tony Blair hope to restore peace and security in Iraq while allowing mercenary armies to operate completely outside the law?"

BRIAN BRADY WESTMINSTER EDITOR

MINISTERS are negotiating multi-million-pound contracts with private security firms to cover some of the gaps created by British troop withdrawals.

Days after Tony Blair revealed that he wanted to withdraw 1,600 soldiers from war-torn Basra within months, it has emerged that civil servants hope "mercenaries" can help fill the gap left behind.

Officials from the Foreign Office and Ministry of Defence will meet representatives from the private security industry within the next month to discuss "options" for increasing their business in Iraq in the coming years.

The UK government has already paid out almost £160m to private security companies (PSCs) since the invasion of Iraq, for a range of services, including the protection of British officials on duty and in transit in some of the most dangerous parts of the world.

But, despite expectations that the booming market for private security would go into decline following the bursting of the "Iraq bubble", firms have now been told to expect even more lucrative work during the "post-occupation phase".