But with billions of dollars of reconstruction work at stake, many of the contractors on Thursday vowed to stay on despite the lurking dangers.

"When violence escalates, we adapt," Sally Johnson, vice-president of the North Carolina firm Research Triangle International, said.

The firm has 196 international staff in Iraq and 2200 Iraqis working for them.

"Of course, security is a major expense and worry," said Johnson, whose firm got a one-year extension worth up to $154 million on its contract this week.

Expensive security

US officials estimate security eats up 10% to 15% of contract costs in Iraq, and that rate can only go higher following Wednesday's killings in Falluja.

Four American security contractors were killed and their bodies burned, mutilated and dragged through the central Iraqi town by angry crowds before two were hung from a bridge.

A direct fall-out of the killings has been the postponement of a high-profile US-sponsored trade fair for companies rebuilding Iraq, scheduled to open next week in capital Baghdad.

Full steam

The Programme Management Office of the US-led occupation authority, which is in charge of $18.6 billion worth of US-funded contracts to rebuild Iraq, said the Falluja attack would not halt its work.

"There are going to be tragic days such as yesterday, but we are moving forward with the reconstruction, which will in turn help the security environment," spokesman Bruce Cole, said.

US-energy giant Halliburton – with huge contracts in Iraq - said every precaution was being taken to safeguard its employees.

Some companies have increased the number of armoured vehicles and limited the amount of time staff spend in transit as a precautionary measure.