Tea-tree oil, used in medicines and cosmetics the world over, has been branded unsafe by an influential panel of scientists in Europe.
The group, which rules on the safety of consumer products for the European Commission, warned undiluted tea-tree oil could be unsafe to sell to the public.
It claimed that even small amounts could be risky because existing safety tests were inadequate, and has told the cosmetics industry it has less than 12 months to prove it is safe to use.
It said the neat oil was "a severe irritant" to the skin and "degraded rapidly" if exposed to air, light and heat. Even widely sold toiletries were of "questionable stability" and sold without adequate proof of safety.
Dr Stewart Jessamine a senior medical adviser with the Ministry of Health's drug safety agency, Medsafe, said he did not want to comment specifically because he had not seen the report.
"None of the products is actually intended to be swallowed, as I understand it."
Nicholas Murray-Leslie, the managing director of the New Zealand Coromandel Mountains Tea Tree Oil Co, said the Australian tea tree and the New Zealand tea tree plants were not the same.
"They are not the same family. They are talking about an oil that belongs to an Australian plant. That is the end of the story."
The warning however will alarm Britain's health and beauty firms. Toiletries that use tea-tree oil are among their biggest sellers.
Retailers such as Holland & Barrett could now be forced to withdraw their top-selling ranges of pure tea-tree oil.
The oil is one of the most popular natural medicines in Britain and is used in shower gel, shampoos and toiletries.
But the Scientific Committee on Consumer Products, which officially advises the EU on whether products can be sold, has said it raised serious concerns.
In an unusually blunt official opinion released last week, the committee stated: "The sparse data available suggest undiluted oil as a commercial product is not safe."
Its major concern was that toxic and risky chemicals become even more potent - up to three times as strong - if stored at room temperature, and exposed to light and air.
Clinical trials had also shown new allergies in small numbers of people, and led to allergic reactions in others. There were also cases where children and adults had suffered severe toxic reactions after swallowing the oil.
Europe's toiletries and cosmetics firms have been given until the end of this year to answer its complaints - an unusually strict deadline - when it will issue a final ruling on the future sale of the oil.
The warnings follow official advice from the European cosmetics industry association that neat tea-tree oil should not be used on the skin, and products should use less than 1 per cent oil, because of the known risk of skin rashes.
Chris Flowers, head of the British Cosmetic, Toiletry and Perfumery Association, said firms knew the safety limit. He added that manufacturers were also legally bound to ensure their products were safe.
He said: "Many people have assumed that because it is natural, it must be fine. The industry has known it isn't fine and that we have to understand the safety issues."
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Tea-tree oil unsafe, say EU scientists
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