According to a 'Financial Times' report, the Foreign and Commonwealth Office's budget for projects to stem the spread of overseas terrorism, believed to include countries like Pakistan and Yemen, will drop from 30 million pounds annually to 15 million pounds in a drive to slim down the diplomatic service.
The massive reduction in the country's counter-terrorism budget would come amid official warnings that Britain faces the most severe threat to its security from overseas terror groups since the London bombings in 2005.
Around 500 Britons are believed to be fighting alongside Al Qaeda affiliated factions, including Isis.
Assistant Commissioner Cressida Dick, Britain's most senior counter-terrorism police officer, warned that the country would be dealing with the threat from Britons returning from Syria and Iraq for "many years".
Dick's comments came after an apparent recruitment video for jihadists in Iraq and Syria featured several Britons.
Reyaad Khan, a 20-year-old from Cardiff in Wales, was identified as one of the men in the film, posted by internet accounts linked to militants from the Islamic State of Iraq and the Levant (Isis).
The group has a presence in Syria and is engaged in fierce fighting with Iraqi government forces.
Khan's mother told 'Sky News': "Reyaad, please come back home. I'm dying for you. You're my only son. Please come home Reyaad. Please send me son back home. He's my one and only son. I and my family need him back."
Former MI6 director of global counter-terrorism Richard Barrett has said that as many as 300 radicalised young men had returned to the UK.
Police across the UK have made 65 Syria-related arrests since the start of 2012, including 40 in the first three months of this year.
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