Prime Minister Tony Blair sent secret messages to Ken Bigley's captors in a bid to save him, it emerged tonight.
Mr Blair made contact through a mystery intermediary who approached the British Embassy in Baghdad just four days ago. It is thought to be the first time contact has been made with the Islamic fanatics led by Abu Musab al-Zarqawi and came after Mr Blair said he would listen if they got in touch.
Mr Bigley's wife Sombat and his family were kept informed of the covert communications. However, al-Zarqawi's hardline group refused to drop its demand for the release of women prisoners in Iraq.
Mr Blair and colleagues have insisted throughout that no women are in British custody in the country. Foreign Secretary Jack Straw, who was in the Iraqi capital on Tuesday and Wednesday, approved and endorsed the messages as well as Mr Blair.
They were in line with the Government's public pronouncements, Mr Straw told a Foreign Office press conference.
His Iraqi counterpart, Hoshiyar Zebari, later stressed there had been no "negotiation" with the kidnappers.
Mr Straw rejected suggestions from Mr Bigley's brother Paul that more could have been done to save him.
The Foreign Secretary said he "fully understood the grief of family members", but added: "We did everything we possibly could."
Mr Straw said he could only give "a limited outline" of the efforts to free Mr Bigley.
"Four days ago, an individual approached the British Embassy in Baghdad, presenting himself as a potential intermediary with the captors," he said. "It was very clearly in Mr Bigley's interest that we should do all we could to establish contact.
"Messages were exchanged with the hostage-takers in an attempt to dissuade them from carrying out their threat to kill Mr Bigley.
"But at no stage did they abandon their demands relating to the release of women prisoners, even though they were aware that there are no women prisoners in our custody in Iraq.
"Both the Prime Minister and I approved these communications and endorsed their content, which was in line with the public statements which both of us had made.
"Ken Bigley's family in Liverpool and his wife in Thailand were kept fully aware of our communications with this intermediary.
"This afternoon, as you all know, the intermediary has provided us with proof beyond reasonable doubt that Ken Bigley's captors have carried out their threat.
"Our hearts and prayers go out to Ken Bigley's family, his colleagues and friends."
Mr Straw said he would be travelling to Liverpool tonight "to convey my sympathies to Mr Bigley's family".
Iraqi Foreign Minister Hoshiyar Zebari said that while there had been contact there was no suggestion of concessions.
"As far as I can tell you there was no negotiations between the British Government and the Jihad group and al-Zarqawi," he told Channel 4 News.
"They are driven by hate. They are driven by hatred. They are a terrorist group who really have no mercy whatsoever.
"They have their own ideology and ideas. They are a menace to the Iraqi people and this group should be eliminated."