The Serious Fraud Office will miss its own deadline for bringing corruption charges against BAE Systems, Europe’s largest defence company, this week as it struggles with the complexity of the case.

Legal sources said that charges could be delayed until next year as the SFO’s leading counsel and the Attorney-General are yet to assess the case.

The SFO is understood to be streamlining its investigations to make a possible prosecution easier and will drop many lines of inquiries into four foreign arms deals won by BAE.

The SFO has assigned more than 30 staff to the case and it had hoped to get its paperwork to Baroness Scotland of Asthal, the Attorney-General, by the end of this week. However, it is understood that the process will be delayed as the SFO’s leading counsel must also submit his analysis of the evidence.

The Attorney-General is also expected to ask for outside legal advice before she decides whether the case is strong enough for BAE, which employs more than 100,000 staff, to be charged. Legal sources said that she was unlikely to make a decision before December and it could even be delayed until the new year.

The SFO is investigating allegations of bribery and corruption in four deals that BAE did with South Africa, Tanzania, the Czech Republic and Romania.BAE has denied any wrongdoing and says that, if charges are brought, it will fight them in court, if necessary.

It appears, however, that BAE may escape questioning over the South Africa and Romania deals as the SFO is understood to be preparing to jettison large parts of its investigation. It is likely that the SFO will focus on one or two incidents rather than try to bring a case so large that it could collapse under its own weight.

The SFO is continuing to hold out the prospect of an out-of-court settlement. The two sides had been negotiating but failed to agree terms by the SFO’s deadline of the end of last month. A settlement remains a possibility if BAE admits wrongdoing and pays a fine — possibly of £300 million. BAE is understood to have ruled out a settlement of more than £30million.

A spokesman for BAE said: “The company continues to expend considerable effort seeking to resolve ... the historical matters under investigation by the SFO. BAE Systems has at all times acted responsibly in its dealings with the SFO, taking into account the interests of its shareholders and employees, and legal advice.”

An out-of-court settlement would have the added advantage for BAE that the British authorities would stop co-operating directly with the United States Department of Justice, which is also investigating the company over arms deals with Saudi Arabia.

The inquiry relates to arms deals BAE did about ten years ago in which it used middlemen who are alleged to have bribed officials. In South Africa, BAE secured a £2.3 billion deal to supply Hawk trainer and Gripen fighter aircraft; in Tanzania the company sold the Government a £28 million air traffic control system. The Czech investigation has focused on a £1billion deal to supply Gripens, and Romania bought two second-hand Royal Navy frigates that were refurbished by BAE.

BAE Systems appointed Linda Hudson, 59, to head its business in the US yesterday, effectively making her the most powerful woman in the global defence industry. She becomes BAE’s first female executive board member and will be responsible for a business that had a turnover of more than £10billion last year. Previously she ran the company’s Land Systems division.

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