Number 10 has rejected claims of wrongdoing after a Sunday newspaper revealed that flats owned by the Blair family are being rented by a defence firm working on government contracts.

A report on the Mail on Sunday said the flats in Bristol were being let to executives of French defence company Thales.

The firm has previously given donations to the Labour Party, and is working on a range of major defence contracts - including a multi-billion pound deal to develop two new aircraft carriers for the Royal Navy.

The flats were at the centre of a previous row when it emerged that Cherie Blair had been advised on their purchase by Australian conman Peter Foster, a former boyfriend of her friend Carole Caplin.

Following the reports, Downing Street said the Blairs had not been involved in letting the flats.

A spokesman said they were managed by a blind trust set up to separate the prime minister from decisions about how his assets are invested.

"The Blairs play no part whatsoever in the choosing of tenants of the Bristol flats," said the spokesman.

"It is all handled by the Manchester Trust. Nor have they ever had any contact with the tenants.

"The idea that there is any conflict of interest arising from it is therefore absurd."