From the Guardian:

A chemical plant which the US says is a key component in Iraq's chemical warfare arsenal was secretly built by Britain in 1985 behind the backs of the Americans, the Guardian can disclose.

Documents show British ministers knew at the time that the £14m plant, called Falluja 2, was likely to be used for mustard and nerve gas production.

Senior officials recorded in writing that Saddam Hussein was actively gassing his opponents and that there was a "strong possibility" that the chlorine plant was intended by the Iraqis to make mustard gas. At the time, Saddam was known to be gassing Iranian troops in their thousands in the Iran-Iraq war.

But ministers in the then Thatcher government none the less secretly gave financial backing to the British company involved, Uhde Ltd, through insurance guarantees.