The UK Treasury is planning to shut down the British Government's controversial arms sales department on the grounds that it subsidies major weapons manufacturers such as BAE Systems.
The Defence Export Services Organisation (DESO) spends £15m a year on helping British firms sell equipment abroad.
Citing leaked documents, UK newspaper The Guardian says former defence minister Stephen Timms ordered a review of the department before he left his post earlier this year.
The review says Britain's reputation was being damaged by 'promoting arms exports to countries with severe developmental shortcomings and/or human rights concerns'.
The report comes after a controversial investigation into Britain's arms industry and allegations of corruption by BAE in connection with a 20-year-old deal with Saudi Arabia was halted because of concerns it would harm the government's relationship with the nation.