The British government is cutting its financial ties with Iranian banks over fears about the country's nuclear programme.

"We are doing this because of international evidence that Iran’s banks are involved in the development of Iran’s weaponised military nuclear weapon programme. We are doing this to improve the security not just of the whole world but of the national security of the UK", George Osborne said on Monday.

The UK has never cut off powers to a banking sector in this way before. The Treasury said in a statement that the action "underlines the severity of the government concerns about Iran's activities."

A report from the International Atomic Energy Agency (IAEA) this month that the country had made significant progress towards building a nuclear weapon, leading to a step-up in contingency planning by UK and US authorities over theoretical pre-emptive strikes.

Foreign Secretary William Hague said: “The IAEA's report last week provided further credible and detailed evidence about the possible military dimensions of the Iranian nuclear programme. Today we have responded resolutely by introducing a set of new sanctions that prohibit all business with Iranian banks.

“We have consistently made clear that until Iran engages meaningfully, it will find itself under increasing pressure from the international community. The swift and decisive action today coordinated with key international partners is a strong signal of determination to intensify this pressure.”

According to AP, Canada and the US will follow suit with sanctions against Tehran.