MPs are preparing to send a delegation to Tony Blair demanding that he intervene to save the £10 billion Saudi arms deal threatened by a corruption inquiry.

Backbenchers whose constituents’ jobs rely on the contract to sell Eurofighter jets to Saudi Arabia say the prime minister must halt the two-year investigation.

They will warn Blair that 50,000 British jobs are at risk if the Serious Fraud Office (SFO) does not wrap up its investigation into allegations that BAE Systems, manufacturer of the Eurofighter in Britain, operated a slush fund into which it made payments for members of the Saudi royal family.

In addition to the backbenchers’ plan, Jack Straw, the Commons leader whose Blackburn constituents could lose jobs if the deal is cancelled, is understood to be privately urging Downing Street to take action.

The Saudis have made it clear through diplomatic channels that unless the inquiry is closed they will take their business elsewhere. A contract with France to buy a rival fighter, the Rafale, is reportedly ready to sign.

As disclosed in The Sunday Times last month, the Saudis have threatened to sever diplomatic relations.

The crisis has left Downing Street facing a dilemma: lose the deal (and possibly the jobs), or intervene and risk appearing to condone corruption. This would add to the sleaze allegations swirling around the government from the cash-for-honours affair.

Blair has been told the arms deal could collapse within a week after the SFO infuriated the Saudi royal family by investigating their Swiss bank accounts.

BAE Systems has been paid more than £43 billion by the Saudis to equip, organise and train their airforce under the Al-Yamamah contract signed in 1985.

It was described as the biggest sale of anything concluded by Britain. Last year another deal was agreed to supply 72 Eurofighter Typhoons and other services but that is now hanging in the balance.

Straw has publicly promised to raise the backbenchers’ concerns with Lord Goldsmith, the attorney-general, who has the power to intervene in the SFO investigation.

Goldsmith could rule that persisting with the inquiry is not in the national interest or allocate more resources to the investigation to bring it to a swift close.

However, he is said to be reluctant to step in for fear of accusations that he is allowing political pressure to influence a criminal investigation. Friends say he still feels compromised by the way in which he was pressured in 2003 over his advice to the government on the legality of the Iraq war.

However, MPs representing constituencies dependent on Eurofighter jobs say concessions must be made to the Saudis.

Lindsay Hoyle, the Labour MP for Chorley, where many jobs depend on the contract, said MPs from across the political divide were preparing to send a delegation to the prime minister.

“Quite a lot of MPs are saying that this is a major contract and that an incident like this puts thousands of jobs at risk. It could be a real problem for them.

“But you have to ask: how serious are the Saudis? Are they making just a lot of threats?” Some backbenchers believe tensions are being deliberately stoked by the French, who stand to benefit if the contract collapses.

Michael Jack, the Tory MP whose Lancashire constituency includes Warton, site of one of the main BAE plants making the Eurofighter, questioned whether the French were whipping up “false deadlines”.

Executives on the Defence Industries Council will this week add to the pressure on the government with a letter to Des Browne, the defence secretary, voicing their concerns over the potential loss of business.

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