A British construction company has admitted that it may have made corrupt payments to Saddam Hussein's regime in Iraq to win an export order.

The allegedly improper payments to Saddam's government by Mabey & Johnson, owned by one of Britain's richest families, have been under investigation by the Serious Fraud Office for more than a year.

The firm has made a series of disclosures in its recent annual results. Mabey said that in April this year, it "disclosed to the SFO evidence that had come to light suggesting that in 2002 the company may have indirectly made two payments to the Iraqi regime in breach of UN sanctions".

Mabey also disclosed that it "has recently been notified of allegations that certain historical contracts may have been procured through corrupt acts", but did not say how many contracts nor which countries were involved.

The company has called in a firm of City lawyers, Herbert Smith, to carry out its own inquiry into all the corruption allegations. New managers have been installed at the firm.

In February last year the SFO launched its investigation into the claims that a number of British firms, including Mabey & Johnson, paid bribes to Saddam's government under the United Nations oil-for-food sanctions scheme.

The investigation was triggered by an official UN report which had alleged that Saddam's government had abused the sanctions scheme and demanded illicit payments from foreign companies seeking contracts.

The report had alleged that Mabey paid a $202,000 (£101,000) kickback between 2001 and 2003 and was handed a $3.6m contract by the Iraqis.

When the investigation started the bridge-building firm said there was no truth in the allegations.

The Mabey family has made a fortune - estimated to be more than £300m - from building and selling steel bridges to 115 countries around the world. Mabey said the allegations had already contributed to a £24m loss last year and warned the company may have to pay a "significant" fine if it is found guilty of graft.

Mabey said it took the corruption allegations "very seriously". "The company will continue to cooperate voluntarily and fully as appropriate with the SFO.

"The board of the company is committed to the current in-depth review of policies and procedures and the subsequent training to ensure that all employees and international representatives comply fully with the Mabey group code of ethics."

The investigation by the SFO continues amid persistent criticism that Britain has failed to prosecute any UK firms for making corrupt payments to foreign politicians and officials to win contracts abroad.

The Labour government has claimed to be cracking down on corrupt practices since the Blair administration tightened up the law in 2001.

Mabey faces further trouble as its former sales director, Jonathan Danos, has alleged in court papers that the company disguised secret payments to middlemen in its sales to Jamaica, the Dominican Republic and Panama to avoid official scrutiny.

Danos is in turn being sued by the firm for defrauding Mabey by allegedly skimming off money in the deals for his own use.

Both sides deny the accusations. The case is due to be heard next year, although private negotiations to settle the matter have taken place.

The firm was founded by Bevil Mabey who had originally started by buying up spare Bailey bridges from the army after the second world war. The Berkshire-based Mabey group of companies has made regular donations to the local Tory party in Wokingham. John Redwood, the Wokingham MP, was chairman of an associated investment company until March.

Backstory

The oil-for-food scheme was designed to help the Iraqi people who were suffering the effects of UN sanctions imposed on their country after Saddam invaded Kuwait. It ran from 1996 until 2003. The regime was allowed to choose which foreign firms got the contracts to send supplies. In 2005 a UN-funded report by Paul Volcker, former chairman of the US Federal Reserve, alleged that Saddam's regime exploited this loophole. He reported Saddam's regime "diverted $1.8bn in illicit surcharges". Volcker said 2,400 companies from 66 countries made irregular payments to the regime.