Scientists in Britain plan to become the first in the world to produce unlimited amounts of synthetic human blood from embryonic stem cells for emergency infection-free transfusions.

A major research project is to be announced this week that will culminate in three years with the first transfusions into human volunteers of "synthetic" blood made from the stem cells of spare IVF embryos. It could help to save the lives of anyone from victims of traffic accidents to soldiers on a battlefield by revolutionising the vital blood transfusion services, which have to rely on a network of human donors to provide a constant supply of fresh blood.

The multimillion-pound deal involving NHS Blood and Transplant, the Scottish National Blood Transfusion Service and the Wellcome Trust, the world's biggest medical research charity, means Britain will take centre stage in the global race to develop blood made from embryonic stem cells. The researchers will test human embryos left over from IVF treatment to find those that are genetically programmed to develop into the "O-negative" blood group, which is the universal donor group whose blood can be transfused into anyone without fear of tissue rejection.

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This blood group is relatively rare, applicable to about 7 per cent of the population, but it could be produced in unlimited quantities from embryonic stem cells because of their ability to multiply indefinitely in the laboratory.

The aim is to stimulate embryonic stem cells to develop into mature, oxygen-carrying red blood cells for emergency transfusions. Such blood would have the benefit of not being at risk of being infected with viruses such as HIV and hepatitis, or the human form of "mad cow" disease. The military in particular needs a constant supply of fresh, universal donor blood for battlefield situations when normal supplies from donors can quickly run out.

But developing blood made from the cells of spare IVF embryos will raise difficult ethical issues for people not happy with the idea of destroying embryos to create stem cells. It also raises the intriguing philosophical question of whether the synthetic blood will have come from someone who never existed. In theory, just one embryo could meet the nation's needs.

The Wellcome Trust is believed to have promised £3m towards the cost of the project, with further funding coming from the blood transfusion services of Scotland, and England and Wales. The Irish government is also understood to be involved. A spokesman for the Wellcome Trust said complicated legal issues were still being ironed out between all the parties involved but that an announcement is likely to be made in the coming week.

The project will be led by Professor Marc Turner, of Edinburgh University, the director of the Scottish National Blood Transfusion Service. Professor Turner has been involved in studies investigating how to ensure donated blood is free of the infectious agent behind variant CJD, the human form of "mad cow" disease. Several vCJD patients are thought to have contracted the disease by blood transfusions.

Professor Turner was unavailable for comment but a spokeswoman for the National Blood Service for England and North Wales confirmed that negotiations on the joint research project were at an advanced stage and that legal, rather than scientific, issues were holding up the announcement.

The multi-centre collaboration is also understood to involve scientists at the Medical Research Council's Centre for Regenerative Medicine at the University of Edinburgh, and Roslin Cells, a spin-off company that has emerged out of the Roslin Institute, where Dolly the sheep was cloned in 1996.

Scientists in other countries, notably Sweden, France and Australia, are also known to be working on the development of synthetic blood from embryonic stem cells. And last year, a team from a US biotechnology company, Advanced Cell Technology, announced that it has been able to produce billions of functioning red blood cells from embryonic stem cells. But the US work had been held up because of funding problems dating back to the ban on embryonic stem cell work under the Bush administration. President Barack Obama has since reversed that policy.

In Britain, the project was held up because of the difficulty of finding funding for "translational" research that attempts to take scientific studies in the laboratory into the earliest stages of commercial development. This problem has now been overcome.