Prime Minister David Cameron said the interim report by MoD permanent secretary Ursula Brennan made clear that Fox had made “serious mistakes” in his links with Adam Werritty and that procedures within his department needed tightening up.
Cameron ordered the government’s top civil servant, cabinet secretary Gus O’Donnell, to join Brennan in completing her inquiry.
The Labour party said it was “beyond doubt” that Fox had breached the ministerial code of conduct by attending a meeting in a Dubai hotel with representatives of defence company Cellcrypt arranged by Werritty, the best man at his wedding who styled himself an adviser to Fox.
Shadow defence secretary Jim Murphy said Fox had “driven a coach and horses through the rules” and called on Cameron to refer the case to the independent adviser on ministers’ interests.
But Fox received strong support from the Conservative backbenches as he made his apology to the House while Downing Street said the defence secretary “absolutely” retained Cameron’s full confidence.
Fox hit back at Labour by telling MPs the opposition party had received a £10,000 donation from Cellcrypt.
Werritty was with the defence secretary when he met the president of Sri Lanka on a personal basis in London last year and joined Fox when he visited the country in July.
But Fox told MPs: “Mr Werritty was never present at regular departmental meetings, during private meetings we did not discuss either commercial or defence matters, he had no access to classified documents, nor was he briefed on classified matters.”
A source close to the defence secretary said Fox had personally received assurances from his friend and former flatmate that he had never benefited financially from their association.
Fox said yesterday: “It was a mistake to allow distinctions to be blurred between my professional responsibilities and my loyalties to a friend.
“I am sorry for this, I have apologised to the prime minister, to the public and, at the first opportunity available, to the House.”
Fox confirmed that Werritty arranged the Dubai meeting between him and Harvey Boulter, chief executive of the Porton Capital private equity fund, after the pair found themselves dining at nearby tables in June.
Werritty was able to tell the businessman that Fox was passing through Dubai the following day as the defence secretary had himself given him details of his trip back from visiting troops in Afghanistan.
Fox said they had had a “general discussion” about what Porton’s company Cellcrypt might do for the MoD but it did not result in any tender being made for a defence contract.
He told MPs: “I accept that I should not have had a meeting with a potential commercial supplier without an official being present. This was entirely my fault and I take full responsibility for it.”
The defence secretary told MPs that, to avoid any “appearance of potential wrongdoing”, Werritty will no longer pay private visits to the MoD, attend international conferences where Fox is present or mix socially abroad with him when he is on official business.