The Mayor of London escalated the dispute over building the £4 billion Olympic City in East London by hitting out at two of its key backers, David and Simon Reuben. Mr Livingstone apparently suggested at his weekly press briefing that if the brothers were not happy they should go back to their country and see whether they could do better under the ayatollahs.

Pressed to clarify his remarks, he told the Evening Standard: “Perhaps if they’re not happy here they can go back to Iran and try their luck with ayatollahs, if they don’t like the planning regime or my approach.” Conservatives on the London Assembly said that the brothers were not Iranian but born in India of Iraqi Jewish parents. Brian Coleman, assembly member for Barnet and Camden, said: “This is the latest anti-Semitic remark by Livingstone.

He clearly has a major problem with the Jewish business community. To suggest that these men should go to Iran is shocking, outrageous and grossly offensive to the entire Jewish community.”

City Hall sources acknowledged that Mr Livingstone had become increasingly frustrated with the brothers over the Olympic City plan but said that their nationality was not relevant and had nothing to do with his remarks.

The dispute came as Mr Livingstone was preparing his appeal against a four-week suspension from office over comments to a Jewish reporter. Last month the Adjudication Panel for England unanimously found him guilty of being “unnecessarily insensitive and offensive” in comparing Oliver Finegold, of the Evening Standard, to a Nazi concentration camp guard. Mr Livingstone won a last-ditch legal bid to remain in office, only hours before his suspension was scheduled to begin, pending the appeal. The Reubens control half the consortium building the Stratford City development. The two remaining stakes are held by the Westfield and Stanhope groups.

At the press briefing Mr Livingstone apparently said that a “poisonous state of relations” now existed in the consortium. He then implicated the brothers in the collapse of plans for a hospital at Paddington and of having a “divisive” role in a shopping centre being built at White City. The brothers issued a statement in which they described the mayor’s remarks as “totally inaccurate”.

It added: “The Reuben brothers remain completely committed to the Stratford City project in its entirety as well as the Olympic opportunity.

“They are working extremely hard to deliver the development for the long-term benefit of London and Londoners. That is what they shall continue to do.

“Mr Livingstone’s comments on the Reuben brothers’ role in the Paddington and White City developments are also unsubstantiated.”

They said that they had played no role in the decision not to proceed with the Paddington development, and added that their involvement in the White City project had been bought out.

A spokesman for Mr Livingstone’s office said that it was aware of the story in the Evening Standard and of the comments by the assembly Conservatives.

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