The British Army is facing £40 million-plus spending cuts that will hit vital equipment and training, it has been reported.

According to a leaked report obtained by the Sunday Telegraph, budget restrictions will see bases closed and exercises cancelled.

It would also rule out the deployment of high-tech missile systems to Iraq or Afghanistan in the event of a military emergency, it suggested.

An MoD spokesman said: "We do not comment on leaked documents."

The newspaper said the report was drawn up for General Sir Richard Dannatt, the commander-in-chief of Land Command which controls the Army's fighting capability.

The document concluded that the necessary cost-cutting over the next eight months would result in "severe impediment to the delivery of operational capability".

Consequences would also include reduced repair budgets, the early withdrawal of weapons systems, reduced ammunition stockpiles and slowed recruitment, it said.

The cash crisis had ruled out the building of a security fence at the North Yorkshire air base which is home to the Apache attack helicopters.

The Dishforth base could now close, the report warned.

Other Army departments as well as the Navy and RAF also faced cuts, the paper said, to cope with the cost of the operations in Iraq and Afghanistan.

Liberal Democrat defence spokesman Nick Harvey said: "If these reports are accurate, this is a disaster in the making. It beggars belief that the Treasury is putting financial pressures on the armed forces when they are at full stretch in Afghanistan and Iraq.