Border areas are known to be unsafe

Timothy Nutt, 49, was found on Saturday in the west of the country, 40 miles (64 km) from the border with Sudan.

The Eritrean said Mr Nutt's death was the work of a group funded by the Sudanese government.

He was found with his throat cut in a dry stream-bed near the village of Bisha, it was reported. His off-road vehicle had been set on fire.

The geologist is believed to have worked for Canadian firm Nevsun Resources, a mineral exploration company specialising in gold mining.

A spokesman for the Foreign Office said: "We are aware that the Eritrean Foreign Ministry has issued a statement saying that an Islamic group is responsible for Mr Nutt's death but until the investigation is completed we are not going to comment any further.

This cowardly act of terror is designed to discourage investment in Eritrea by terrorising foreign investors Eritrean foreign ministry

"We are not issuing any specific warnings to people travelling to the country."

In February, a group calling itself the Eritrean Islamic Jihad Movement said it had planted mines which claimed the lives of five Eritrean government soldiers in the far west.

The border between the two countries has been shut down since October last year after Sudan alleged Eritrea had backed rebels.

The Foreign Office does warn against travel to border areas in Eritrea and admits there is an increased terrorist threat because of the war against Iraq.

Mr Nutt's next of kin have been informed.

A spokesman for Eritrea's foreign ministry said: "On Saturday, a terrorist group sponsored by the government of Sudan sneaked into the environs of Bisha, western Eritrea, from Sudanese territory and murdered in cold blood Mr Timothy Nutt, a British national working in the area," the ministry said in a statement.

"It is clear that this cowardly act of terror is designed to discourage investment in Eritrea by terrorising foreign investors."