Underwriting a deal to sell Typhoon warplanes to Qatar will risk "billions of Exchequer funding" if Doha defaults on the agreement, The Telegraph cited Treasury officials as saying in a letter on Tuesday.
The officials also warned that the 6 billion pound ($7.6 billion) deal would require "unprecedented" support from British taxpayers.
The agreement runs the risk of "skewing" the government's credit agency "by concentrating about 25 percent of their portfolio risk in one transaction," they underlined.
A hefty contract to supply 24 Typhoon aircraft to the Qatari Air Force was announced by the British defense giant BAE Systems in December 2017.The deal, which aims to secure UK jobs, will be implemented before the end of 2018.
Commenting on the deal, UK Defense Secretary Gavin Williamson said that the "formidable" Typhoon jets would help expand "the Qatari military's mission to tackle the challenges we both share in the Middle East, supporting stability in the region and delivering security at home."
"This agreement is a strong endorsement of Typhoon's leading capabilities and underlines BAE Systems’ long track record of working in successful partnership with our customers," Woodburn added.