crucifixions and lashings to punish its citizens.

But Mr Hammond warned that cancelling it would not be in the national interest as it would make Britain appear an untrustworthy ally - and No 10 had sided with him, the paper reports.

Downing Street said there would be no financial penalties for pulling out of the bid process.

Analysis

Image copyright PA Image caption Karl Andree

by Frank Gardner, BBC security correspondent

Saudi officials say they are baffled by the headlines suggesting that an elderly Briton, Karl Andree, may face flogging for possessing alcohol.

They say that was never even a possibility because of his age and ill health.

The Saudis are unlikely to be troubled by the cancellation of a very small contract for Britain's Ministry of Justice to give training advice to Saudi prisons -should be sending a strong message to repressive regimes that the UK is a beacon for human rights and that this contract bid is unacceptable in the 21st Century, and would damage Britain's standing in the world," he said.

Kate Higham, from human rights organisation Reprieve, said cancelling the bid had "sent a clear message that the UK does not support Saudi Arabia's gross violations of human rights".

Image copyright Getty Images Image caption Jeremy Corbyn has been highly critical of Saudi Arabia and its human rights record

The prisons bid was submitted by the now defunct commercial arm of the Ministry of Justice, Just Solutions international (JSi), which was established under Mr Gove's predecessor Chris Grayling in 2013.

Mr Gove closed it down amid criticism that it was selling prison expertise