The British Government says it will consider the terms of its lucrative arms exports to Saudi Arabia after its ally admitted responsibility for killing more than 140 mourners at a funeral in Yemen.

Air strikes that targeted the gathering in the capital of Sana’a on 8 October have renewed international condemnation of the UK’s controversial weapons trade with Saudi Arabia.

A report by the Saudi-led coalition’s Joint Incidents Assessment Team (JIAT) admitted responsibility on Saturday but blamed “wrong information” from allies of the Yemeni government, which it is supporting in the country’s civil war.

Video footage shows moment air strike hits funeral in Yemen

“A party affiliated to the Yemeni Presidency of the General Chief of Staff wrongly passed information that there was a gathering of armed Houthi leaders in a known location in Sana’a, and insisted that the location be targeted immediately,” investigators said in a statement.

More than 500 victims were also injured in the bombing, for which the Saudi military initially denied responsibility before launching a probe into the “regrettable and painful” attack.

The JIAT’s report claimed the Air Operation Centre in Yemen directed a “close air support mission” to target the funeral hall without approval from the coalition’s commanders, adding: “JIAT has found that because of non-compliance with coalition rules of engagement and procedures, and the issuing of incorrect information, a coalition aircraft wrongly targeted the location resulting in civilian deaths and injuries.”

Investigators called for a review of the rules of engagement and for compensation for families of the victims, who had gathered to mourn the death of the father of rebel interior minister Jalal al-Rowaishan.

The JIAT, which was set up by King Salman in May, also said “appropriate action” should be taken against those who caused the incident, without elaborating further.

Welcoming the report, the Foreign and Commonwealth Office said it was awaiting further detail on the attack in a future report to be released by the JIAT.

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“Our consideration of the reports will be used to contribute to our overall view on the approach and attitude of Saudi Arabia to international humanitarian law, as part of all the information available to us,” a spokesperson added.

“This, in turn, informs the risk assessment made against the arms export criteria.”

Tobias Ellwood, the Middle East minister, repeated his call for peace talks and a truce between all sides in the Yemeni civil war, which has seen the country split into zones controlled by the Hadi government, Houthi rebels, al-Qaeda and Isis.

“I stressed this in meetings with Yemeni and Saudi leaders, including President Hadi and Foreign Minister al-Jubeir, in Saudi Arabia this week,” he added. “We are considering the Saudi investigation report in detail.”

Boris Johnson, the Foreign Secretary, formally raised concern over the funeral strike on 9 October and Mr Ellwood travelled to Riyadh for high-level meetings with Yemeni and Saudi leaders on Thursday, but no details from the closed talks have been released.

Britain sold £3.3bn worth of arms between April 2015 and March 2016 alone – the first year of the Saudi-led coalition’s deadly bombing campaign in Yemen, where it intervened against Houthi rebels at President Abdrabbuh Mansour Hadi’s request.

Ministers have repeatedly rejected calls for a pause in weapons sales amid frequent reports of war crimes and the Government refused to give MPs a vote on the issue, despite the American Senate holding a debate on US exports.

Tim Farron, the Liberal Democrat leader, said the Government's promise to "consider" the terms of its exports showed it has “finally woken up to the fact British arms sold to Saudi Arabia may have been used for the horrific and indiscriminate bombing of civilians in Yemen".

The scene of the air strike on a funeral hall on 8 October (Reuters)

“If this review uncovers breaches of international humanitarian law by the Saudi government, as is highly likely, UK arms sales to the country must be suspended immediately," he added.

“This should mark the start of a shift towards ending British arms sales to the world's most repressive regimes altogether.”

Jeremy Corbyn and Green Party co-leader Caroline Lucas are also among those calling for trade to be suspended, but Theresa May defended the sales last month, claiming the UK’s relationship with Saudi Arabia “helped to keep people on the streets of Britain safe”.

She was speaking in the wake of a report by the Committees on Arms Export Controls, which concluded that British weapons had most likely been used to violate international law and contribute to the “humanitarian devastation” in Yemen.

A United Nations report on children and armed conflict said the Saudi-led coalition was responsible for 60 per cent of all child causalities – 510 deaths and 667 injuries – in the conflict last year.

The UN warned that while international attention has focused on Syria, more than 10,000 people have been killed in Yemen, including at least 4,000 civilians in the past 18 months alone.

All parties in the conflict, including Isis and al-Qaeda, are accused of human rights violations, and Iranian-backed Houthi rebels have also killed civilians with landmines and indiscriminate shelling.