Joshua Rozenberg: "Mr al-Fayed has few friends at Westminister now"

Home Secretary Jack Straw rejected the application for a British passport by the owner of Harrods and Fulham Football Club.

A spokesman for the tycoon said the decision was "perverse" and would be challenged in the courts.

In a statement, the Home Office said: "The home secretary has decided not to grant Mr Mohamed al-Fayed's citizenship application after taking into account all relevant material and having decided to discount the criticisms of him in the DTI inspectors report on grounds of passage of time.

Jack Straw rejected the application after reconsidering the request

"The home secretary has made this decision in light of the further information provided by Mr Mohamed al-Fayed following a further request on 11 March 1999."

Mr al-Fayed's spokesman Laurie Mayer said: "It's a matter of deep regret and we are going to contest the decision.

"We think that the decision by the home secretary is perverse. It's not a decision that a reasonable home secretary could have arrived at on the basis of the available facts.

"We also find it remarkable that only last night the Prime Minister, Tony Blair, and Home Secretary, Jack Straw, saw fit to shake hands with Mr Fayed at a conference of the Muslim Council of Britain.

Mr Al Fayed's spokesman, Laurie Mayer: "We were told the safe-deposit box case would bear no relevance to the application"

"Yet today they have decided he is not fit to be a British citizen."

Mr al-Fayed's first application in 1995 was rejected by the Conservative government.

But eight weeks ago his brother, Ali, was successful in his own citizenship bid and Mr al-Fayed was said to be greatly encouraged.

Al-Fayed should now be deported, says cash-for-questions former MP Neil Hamilton

Ali's application was accepted after Mr Straw ignored a Department of Trade and Industry report that branded the brothers cheats and liars.

The pair have always insisted the DTI report into their takeover battle for the House of Fraser was "unwarranted and unfair".

Mr al-Fayed has been pursuing a British passport for five years.

On coming to power, Mr Straw promised to re-examine the cases.

Despite granting Ali a passport, Mr Straw said more time was needed to examine Mr al-Fayed's application.

The tycoon had claimed that because of Ali's success his own case should now be "at the front of the queue".

But former MP Neil Hamilton, who lost his seat at the 1997 election after allegations he took cash from Mr al-Fayed to ask questions in Parliament, said the home secretary should now consider deporting the Harrods boss.