The collapse in oil prices had opened a huge opportunity for foreign investment in Iraq, officials and private investors said on Thursday.

Until recently, with prices above $100 a barrel, the biggest hurdle to foreign investment had been resistance by Iraqi officials, who believed they could rely on their oil revenue to drive hard bargains. This, said investors was a far greater barrier than even security when it came to making decisions on putting money into the country.

But now with prices about $50 a barrel, Iraqi officials had become far more receptive to the efforts of the World Bank and national development agencies to drum up investment and diversify the country’s economy away from oil, one UK official said.

The comments were made as an Iraqi delegation held meetings with some 250 private businesses ranging from HSBC Bank to BP. They were taking part in an investment conference in London organised by the UK’s Department for International Development.

At the meeting BMI, the UK airline, tentatively agreed to re-establish a direct flight between London’s Heathrow airport and Baghdad. Nigel Turner, BMI’s chief executive, told the FT that he expected the service to begin next spring, with an eye to establishing a daily flight that would make London the gateway to Baghdad.

He thought the airline industry was facing the biggest crisis in its history. But he said BMI could not shy away from good business opportunities such as this.

“We fly to all the places that surround Iraq and a lot of our passengers are Iraqi,” he said, adding: “Iraq is potentially very prosperous ... and desperate for investment.”

He said he was confident that he would gain the permission he needed from the UK and Iraqi governments and that the two would sign the necessary bilateral agreements. Lord Mandelson, the UK’s secretary of state for business, and Nouri al-Maliki, Iraq’s prime minister, signed a broad-ranging memorandum of understanding Thursday to foster closer economic relations.

The memorandum was signed the same day UK troops ended their deployment in Iraq. “Today marks an historic point in UK-Iraq relations – the end of one phase of our relationship, based on military support, and the beginning of another, broader relationship,” Douglas Alexander, the UK’s international development secretary, told the conference. He pointed out that since the end of last year 19 UK companies had put forward $10bn (€7.6bn, £6.8bn) worth of investment proposals.

Several executives from large companies attending the conference privately said that having been hit by the recession their ability to make large investments in Iraq had diminished. But Hussein Isam al-Uzri, chairman of the Trade Bank of Iraq, put a positive spin on the downturn, arguing that Iraq had become more attractive to some, noting: “It’s not as easy as before to make money outside Iraq.”