Jim Drummond said the UK had been unable to deliver on some promises
The bombing of the UN headquarters in Iraq in 2003 had "a very serious impact" on UK efforts to rebuild the country, a senior official has said.
Most UN staff moved out following the August attack, leaving the UK and US to "supplement" a shortfall in knowledge and local contacts, Jim Drummond added.
Mr Drummond, of the Department for International Development, said worse security "restricted" rebuilding work.
He told the Iraq Inquiry the UK was "unable to deliver" on some promises.
A bomb blast outside the UN's central Baghdad headquarters on 19 August 2003 killed 22 people, including lead envoy Sergio Vieira de Mello.
This was five months after the US-led invasion of the country started.
The UN withdrew most of its staff after the bombing because of safety concerns.
November-December: Former top civil servants, spy chiefs, diplomats and military commanders to give evidence
January-February 2010: Tony Blair, Gordon Brown and other politicians expected to appear before the panel
March 2010: Inquiry expected to adjourn ahead of the general election campaign
July-August 2010: Inquiry expected to resume
Report set to be published in late 2010 or early 2011
Asked about the long-term importance of the incident, Mr Drummond, the Department for International Development's [DfID] Iraq director from 2003 to 2005, said: "I think it had a very serious impact [on reconstruction efforts].
"I don't think we realised at the time quite how serious it was going to be, because we had envisaged a major role for the UN in this process."
Many UN staff were moved to the nearby state of Oman, Mr Drummond told the inquiry.
He added: "The IMF [International Monetary Fund] and the World Bank not being there, we had to supplement them with knowledge and contacts ourselves...
"When the IMF programme was eventually put together in the second half of 2004, a lot of the work was by consultants paid for by DfID."
Mr Drummond described the deteriorating security situation following the UN bombing.
He said: "It restricted what we could do. The first time I went to Baghdad, I could travel by road from the airport to the town... It was similar in Basra...
"By 2004 we couldn't do that. We were helicoptering in from Baghdad airport to the Green Zone... It was much more restricted. In Basra there were quite long periods in 2004 when staff were simply locked down."
This made it harder to meet ordinary Iraqis and meant it became more difficult and more expensive to move around.
Mr Drummond said: "It meant that we were unable to deliver on some of the things that we wanted to deliver and had to plan for other ways of doing that.
"We had to find quite a lot of creative ways to maintain what was being done when we couldn't send staff out to see them."
On Wednesday, Sir John Sawers, the UK's special envoy to Iraq from May to July 2003, told the inquiry the level of violence faced in Iraq had been "unprecedented". Britain may have had "second thoughts" about the Iraq invasion had the scale of post-war violence been anticipated, he said.
Sir John, now head of MI6, said "very few observers" foresaw that Iraq would attract al-Qaeda terrorists and Shia extremists backed by Iran.
The Iraq Inquiry is looking into UK policy on the country between 2001 and 2009.
Senior politicians, including Tony Blair, are to appear before it next year, with its report due to be published in late 2010 or early 2011.