The bombing of Flight 103 in 1988 killed 270 people

Jane Swire, whose 23-year-old daughter Flora was among the 270 dead, said letting Libya back into the trade loop should stop other "acts of terrorism".

UK Foreign Secretary Jack Straw also welcomed the move as part of justice.

Sanctions were imposed in 1992 to make Libya hand over two agents blamed for the 1988 bombing of the Pan-Am jet. The UN voted to lift them on Friday.

The lifting of the sanctions follows Libya's agreement to renounce terrorism and pay �1.7bn compensation to the victims' families.

The move clears the way for the relatives to receive the first instalment of compensation, worth �6m to each family.

Foreign Secretary Jack Straw said the development was the result of "patient but firm diplomacy".

The vote marked the beginning of a new era of co-operation between Libya and the international community, he said.

Today's settlement cannot in any way make up for the terrible personal losses suffered by the relatives of those who were killed, but I hope that it will bring some comfort Jack Straw

"This is a result of Libya doing what the Security Council has demanded," he said.

"Accept responsibility... renounce terrorism; pay compensation; and undertake to cooperate with any future Lockerbie investigation."

He said it showed terrorists would be brought to justice, and said it demonstrated that serious issues could be resolved through "commitment, dialogue and co-operation".

It marked a "new and welcome chapter in Libya's relationship with the international community based on co-operation, not confrontation", he said.

'Delighted'

"I know that today's settlement cannot in any way make up for the terrible personal losses suffered by the relatives of those who were killed.

"But I hope that it will bring some comfort for the pain they have endured," he added.

The Reverend John Mosey from Herefordshire, who lost his 19-year-old daughter Helga, said: "I am delighted for a number of reasons. This has been a stressful time with all the 'will they, won't they', but now we know.

"Most of all I am delighted that it means that Libya can be integrated again and there will be less chance of it being a terrorist nation. The news has come as a relief."

It means that Libya can be integrated again and there will be less chance of it being a terrorist nation Reverend John Mosey

He added: "The rawness of our loss has gone but we have suffered an amputation and we have had to learn to walk with a limp, a limp we will walk with for the rest of our lives."

Since the disaster, Dr Jim Swire and his wife Jane, who lost their 23-year-old daughter Flora, have led a high-profile campaign for justice on behalf of UK relatives.

Mrs Swire said: "We are relieved. It can only be a good thing that sanctions on Libya have been lifted and that they are allowed back in the trade loop.

"Hopefully this will prevent any other such acts of terrorism."