LONDON, June 29: Britain's security services, who underestimated the terrorist threat before the September 11 attacks in 2001, are under-equipped because they took too long to expand, the parliament's security watchdog said on Tuesday.

"Because the scale of the challenge posed by the threat at the turn of the millennium was underestimated, the agencies did not seek an increase of the size that we now see until 2003," the Intelligence and Security Committee (ISC) said in its annual report.

"This was too late, and it is why they do not have the level of resources that they need for all their priority requirements," it said. The report highlighted that the agencies should have been alerted to the threat from Al Qaeda three years earlier by the east African embassy bombings which caused some 5,000 casualties.

The failure to realize the scale of the emerging threat meant the agencies had been struggling to catch up after the September 11 attacks in the United States, it said.

As a result the agencies were having to divert resources away from counter- intelligence work against countries like Russia and China which still ran significant spying operations against Britain.

The budget for the intelligence agencies had risen from 909 million pounds in 2001-02 to more than 1.1 billion pounds this year, with further increases in the pipeline, the report said.

The extra money would enable a 50 per cent increase in the staff of Britain's domestic intelligence agency, the Security Service, also known as MI5. The ISC examines the expenditure, administration and policy of Britain's three security agencies, including MI5 and the Secret Intelligence Service (MI6), which concentrates on security matters and spying overseas. -AFP