Michael Fallon has confirmed British-made cluster bombs have been used by Saudi Arabian forces in the current Yemen conflict.

The admission by the Defence Secretary in the Commons came after a Government analysis indicated that cluster bombs manufactured in the UK in 1980s had been used by the Saudi-led coalition in the on-going civil war in Yemen.

The Arab coalition added that there was “limited use” the cluster munitions against “legitimate” military targets, according to a Middle East news service. Mr Fallon added that he welcomed Riyadh’s confirmation it will not use further BL-755 cluster munitions.

Due to their extraordinary risk to civilians, cluster bombs, which release small bomblets over a wider area, were banned in 2010 in an international treaty signed by Britain. The Convention on Cluster Munitions prohibits all use, stockpiling, production and transfer of cluster bombs. Saudi Arabia, however, is not signed up to the convention.

According to Human Rights Watch the weapons “pose a threat post-conflict by leaving remnants, including submunitions that fail to explode upon impact becoming de facto landmines”.

Speaking in the Commons, Sir Michael told MPs: “One specific allegation – that UK-supplied cluster munitions were used in January this year – was raised in this House on 24 May.

“The United Kingdom signed the Convention on Cluster Munitions in 2008 and has not supplied any such weapons to Saudi Arabia since 1989 – over a quarter of a century ago.

“Our initial view, set out by the then minister of state for defence procurement and based on information we held at the time, was that a UK weapon had not been used but we committed to analyse the allegation and to seek a full investigation by the coalition.

“That investigation has now concluded. The coalition confirmed earlier today that a limited number of BL-755 cluster munitions exported from the United Kingdom in the 1980s were dropped in Yemen, including in the incident alleged by Amnesty International not far from the Saudi border by a coalition aircraft.”

Shadow Defence Minister Wayne David replied: “The latest revelation about UK-made cluster munitions being used by the Saudi-led coalition in Yemen is deeply worrying.

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“Not only are these weapons immediately dangerous but they come with a toxic legacy – lying on battlefields and threatening civilians, especially children, long after a conflict has ended.”

Amnesty International called for a suspension of arms sales to Saudi Arabia. Its UK director Kate Allen said: “Over the years, the UK has sold billions and billions of pounds’ worth of weapons – including cluster bombs – to Saudi Arabia, and it’s hardly a surprise they’re turning up in bombed-out villages in Yemen.

“Thousands of Yemeni civilians have already been killed and injured by the Saudi coalition’s reckless and indiscriminate bombing of homes, hospitals, schools and factories.

“It doesn’t require a belated ‘investigation’ within the MoD to tell us what we already knew – that the UK should immediately suspend all further weapons sales to Saudi Arabia that risk fuelling these appalling atrocities in Yemen.”

The Prime Minister of the rebel Houthi government in Yemen has previously accused Britain of war crimes and said politicians cared more about making profits from arms sales than the humanitarian crisis enveloping his country.

Speaking last week Abdel-Aziz bin Habtour said: “They have sold cluster bombs to Saudi Arabia. They know the Saudis are going to drop them on Yemen [...] in Sa’adah and in Sana’a and other provinces.

“I don’t think they are guilty of war crimes, I believe so. They are participating in the bombing of Yemen people.”

Before Mr Fallon’s statement the Ministry of Defence said the Government “takes such allegations very seriously”. A spokesperson added: “We have analysed the case carefully using all available information, considering all possibilities, and raised the issue with the Saudi-led coalition.”

Andrew Smith, a spokesman for the Campaign Against Arms Trade, told The Guardian: “The use of UK cluster bombs by Saudi Arabia is characteristic of a brutal war and a brutal regime. If Saudi forces are prepared to use cluster bombs, then why is the UK continuing to arm and support the regime?

“Once a weapon has left these shores there’s little if any control over where and when it will be used and who it will be used against. The UK must act now to stop the arms sales and to end its complicity in the humanitarian catastrophe that has been unleashed on the Yemeni people.”

Oxfam chief executive Mark Goldring said the Government’s international credibility is being “mangled under the weight of evidence of international humanitarian law violations in Yemen”.