Northern Ireland Secretary Mo Mowlam on Friday promised to act if evidence showed the loyalist paramilitaries was linked to the car bomb.

She spoke after a BBC Ulster report said security reports showed the LVF, which is officially on ceasefire, had taken part.

The breakaway Red Hand Defenders claimed responsibility for Rosemary Nelson's murder.

Pastor Kenny McClinton, who has been acting as a link between the LVF and the decommissioning body, said later on Friday: "The ruling Army Council of the LVF are very angry that they have been blamed.

LVF founder Billy Wright was killed by two INLA men in December 1997

"They say their ceasefire is intact and complete."

The LVF was among the last paramilitary group to declare a ceasefire, after its leader was shot dead inside the Maze Prison by republicans.

But is the only one to have handed any weapons to the international decommissioning commission.

Opponents dismissed this as a token gesture, but Pastor McClinton said more guns would follow.

"I was speaking with the commission this week and we are trying to bring about phase two of decommissioning.

"That is what makes the claims from alleged security sources all the more ludicrous, while some of us are working our backsides off to get the disarmament of these people, sources are blaming them for everything but the murder of Cock Robin."

Dr Mowlam said she would keep the security situation in Northern Ireland under review.

Rosemary Nelson was killed by a car bomb

"For the moment my judgement in the round remains that the ceasefires are holding," she said.

"But recent attacks not least that on Rosemary Nelson are cause for the very gravest concern.

"I am monitoring the situation closely and should I judge it right to act, using the powers available to me I shall not hesitate to do so."

The senior English police officer heading the murder investigation into the booby trap bomb placed under Mrs Nelson's car outside her home in Lurgan, County Armagh in March refused to confirm or deny the reported LVF involvement.

But Dr Mowlam expressed extreme concern over continuing violence in Northern Ireland by groups of any name.

"Since the beginning of May there have been some 20 such incidents, as well as 15 paramilitary assaults," she said.

"Both republican and loyalist groupings have been responsible, with the majority allegedly being carried out by loyalists.