Michael Heseltine tried to block a US-led takeover of helicopter manufacturer Westland in 1985, arguing it could ultimately place the company in Libyan hands, according to newly released government papers.

The battle over the future of Westland turned into a power struggle between Thatcher and Mr Heseltine, with the then-defence secretary eventually quitting the Cabinet in disgust.

The rescue bid was put in after Westland hit financial difficulties.

In a letter to the PM on December 23 1985, Mr Heseltine said he had ordered the joint intelligence committee to compile an assessment of Sikorsky bid partner Fiat, following reports that one of the company’s executives was Libyan and that there were two other Libyans on the board.