Two Britons feared dead in Algeria

Two British workers are reported to be among the dead following an Algerian military raid to free hostages at a desert gas plant.

Algerian state television quoted a hospital as saying four foreigners had been killed and seven wounded amid a confused picture of the crisis.

The report came shortly after Prime Minister David Cameron said the country should be "prepared for the possibility of further bad news".

One British subject was already confirmed dead in the hostage incident in which several others are caught up.

Earlier, there were reports that between six and 35 hostages and eight and 15 rebels had been killed in the fighting.

Algerian authorities reportedly confirmed "several deaths and injuries".

Mr Cameron spoke after it emerged Britain had not been pre-warned of the military rescue operation despite the Prime Minister asking his opposite number to keep him fully informed.

"It's a fluid situation, it's ongoing, it's very uncertain," said Mr Cameron.

"We should be prepared for the possibility of further bad news, very difficult news, in this extremely difficult situation."

The Government's emergency Cobra committee has met twice on Thursday, with Mr Cameron in the chair, and he said they would continue "working around the clock to do everything we can to keep in contact with the families, to build the fullest possible picture of the information and the intelligence".

"I will do everything I can to update people about what is a difficult and dangerous and potentially very bad situation," he said.

The depth of the crisis was underlined by the decision to postpone his long-awaited Europe speech despite arrangements being made for him to chair Cobra from the Netherlands on Friday.

Foreign Secretary William Hague is cutting short a visit to Australia to return to the UK to help deal with the crisis.

Mr Cameron discussed the unfolding violence with US president Barack Obama and French president Francois Hollande earlier.

The militant group believed to be holding the hostages claims that it carried out the attack in retaliation for French military intervention against al Qaida-backed rebels in neighbouring Mali.

The Irish Government said that one of its nationals - Stephen McFaul, 36, from west Belfast - had been freed and has made contact with his family.

Algerian state news agency APS said the raid by the country's special forces at the gas complex in Illizi province, close to the Libyan border, was over.

The drama began on Wednesday morning when heavily-armed militants launched a dawn raid, killing two people and injuring six others.

They claimed to have seized 41 foreign workers including Britons, Americans, Norwegians and Japanese.

A spokesman for the militants claimed that 35 hostages and 15 rebels had been killed when Algerian helicopters strafed the site in today's operation.

The militants - reportedly led by the veteran jihadist Mokhtar Belmokhtar - threatened previously to "eliminate" the hostages if they were attacked.

British offers of assistance to Algeria in dealing with the situation were declined and diplomatic tensions were exposed over the unilateral action.

Mr Cameron was told the operation was under way only when he telephoned the Algerian prime minister at 11.30am on Thursday.

The Prime Minister made clear that he would have preferred to be informed in advance, but the Algerians said they had to act "immediately".

In a fresh call this afternoon, Mr Cameron "emphasised the continuing need for the Algerian security forces to do everything they could to safeguard hostages", No 10 said.

Shadow foreign secretary Douglas Alexander said: "Latest reports of the grave and tragic events unfolding on the ground in Algeria are deeply concerning.

"The priority must be the resolution of the crisis and the safety of the hostages and we offer the Government our support in their efforts to achieve this."