Iranian employees of the British Embassy in Tehran face the prospect of a show trial after the regime said that they had admitted conspiring against the Islamic Republic.

The announcement, made by Ayatollah Ahmad Jannati, 83, the head of Iran’s powerful Guardian Council, at Friday prayers, was a sharp escalation of the confrontation with Britain.

The British Government said that the charges against the arrested local staff were “wholly without foundation” and William Hague, the shadow Foreign Secretary, called a show trial of British embassy staff in Tehran "utterly unacceptable".

The European Union’s 27 member states summoned the Iranian ambassadors in all EU capitals to make formal protests and stopped issuing visas to Iranian officials. A senior European diplomat insisted that the dramatic step of withdrawing EU ambassadors en masse from Tehran was still “very much on the table”.

Two of the nine Iranians arrested last weekend were still being held last night. Ayatollah Jannati did not say how many would be tried or on what charges, but the penalty for extreme cases of treason is execution. The Foreign and Commonwealth Office said that it was seeking urgent clarification on his announcement.

Officials feared that the employees’ “confessions” might have been extracted under duress or torture. British diplomats have not been given access to the two employees still held.

Ayatollah Jannati, a hardline ally of President Ahmadinejad, used his sermon to reinforce the regime’s claim that the charges of electoral fraud, and the massive street demonstrations that followed the result, were orchestrated by Britain to undermine Iran.

He claimed that the British had planned a “velvet revolution” and had given away their conspiracy by forecasting as long ago as March that the elections would trigger riots. “Some people were arrested," the Ayatollah said. "Inevitably they will be put on trial as they have made confessions.”

Hojatoleslam Ali Akbar Hashemi Rafsanjani, the influential former president who backs Mr Ahmadinejad’s defeated rival Mir Hossein Mousavi, had been due to deliver the sermon at Tehran University yesterday. The appearance instead of Ayatollah Jannati is another indication that Ayatollah Khamenei, the Supreme Leader, is in no mood to back down in the confrontation with Britain.

The arrests shocked other EU member states because their Tehran embassies, like Britain’s, cannot function without Iranian advisers, translators, guards and other staff.

On Thursday the more cautious governments, led by Germany and Italy, had rebuffed British proposals that all 19 member states with embassies in Tehran temporarily withdraw their ambassadors in protest.

After yesterday’s sermon, however, a source close to the EU’s Swedish presidency insisted that “all options remain open”. EU governments summoned Iranian ambassadors and told them there could be no “business as usual” while the British staff were held.

Sweden was mandated to warn Tehran of further action if the detainees were not released by next week. President Sarkozy of France said: “Our solidarity with our English friends is total.”

British officials are also pressing for a tough statement from next week’s G8 summit in Italy, which could draw China, the US and other countries into the general condemnation.

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