US President George Bush is expected to signal the concession, which The Times described as a major shift in policy, when he comes to Britain on a state visit next week.

British companies were excluded from the previous round of bidding for the lucrative contracts.

"British firms are excellent firms and I'm sure they will be able to bid competitively," said a leading Bush administrator quoted by The Times.

Spoils of war

"I can't prejudge the process, but let's just say it's likely" that British firms will be bidding for the contracts, the source was quoted as saying.

Washington is preparing to award at least 10 contracts worth as much as $15 billion to rebuild Iraq's oil, electricity, health water, and other infrastructure within the next three months.

The first $2.2 billion of primary contracts were confined to US firms, with one of the early winners being Kellogg Brown & Root, a subsidiary of Halliburton - where US Vice President Dick Cheney was CEO until 2000.