The UK government is poised to abandon plans to float QinetiQ, the defence research group that was until recently part of the Ministry of Defence, the Sunday Telegraph reported.

Part of the defence company will be sold off to a private equity investor instead, the newspaper said.

The decision to scrap the planned flotation comes amid increasing investor disenchantment over the government's handling of Railtrack, the privately-owned railway company which went bankrupt last month after Transport Secretary Stephen Byers refused to bail it out.

The recent poor performance of technology stocks is also believed to be a factor in the government's decision, the Sunday Telegraph said.

Many senior defence industry figures were opposed to the proposed sell-off on security grounds.

QinetiQ has recently been involved in developing systems designed to beef up airline security in the wake of the 11 September attacks.