A criminal investigation has been launched into Peter Mandelson over allegations he handed sensitive information to the paedophile Jeffrey Epstein.

It comes following days of mounting pressure on the Prime Minister, Sir Keir Starmer, to take action on the man he appointed as US ambassador amid questions around the peer’s association with Epstein.

Files released by the US Department of Justice appear to show Lord Mandelson handing the disgraced financier market-sensitive information while he was business secretary in the Labour administration led by Gordon Brown.

Cabinet Office officials passed material to the Met after a review of documents released by the US found they contained “likely market-sensitive information” and that official handling safeguards had been “compromised”.

It is understood that the Met will announce the criminal investigation formally on Wednesday, and confirm that the peer is being investigated on suspicion of misconduct in public office.

Lord Mandelson will also resign his seat in the House of Lords on Wednesday.

On Tuesday, the Prime Minister slammed the peer, saying he had “let his country down” and confirmed he had asked officials to draft new laws that would strip him of his peerage.

But critics said that this was not enough, with the Conservative Party demanding the release of the official vetting files on the former ambassador.

The former prime minister, Gordon Brown, also wrote to the Met on Tuesday with information as he called for an investigation.

He wrote that: “I have today written to the Met Commissioner, Sir Mark Rowley, with information relevant to his investigation of Lord Mandelson’s disclosure of market-sensitive and confidential government information to the American financier, Jeffrey Epstein.”

Mr Brown slammed it as “an inexcusable and unpatriotic act”.

It is understood he sent extensive correspondence to the Commissioner.

Upon the resignation of the former US ambassador from the House of Lords, a Downing Street spokesman said: “It is right that Peter Mandelson will no longer be a member of the House of Lords.”

Epstein was reportedly sent details of internal discussions from the heart of the UK Government after the global financial crisis.

Lord Mandelson appeared to tell Epstein he would lobby ministers over a tax on bankers’ bonuses in 2009, and to confirm an imminent bailout package for the euro the day before it was announced in 2010.

In June 2009, he appears to have passed on what he called an “interesting note that’s gone to the PM”, an assessment by Mr Brown’s adviser Nick Butler of potential policy measures, including an “asset sales plan”.

Conservative leader Kemi Badenoch said: “Five months ago, Mandelson was UK ambassador with the full confidence of the PM.

“Today, he is no longer the ambassador, in Labour or a peer.

“The scandal, sleaze, and speed of his downfall only increases the scrutiny on Starmer and McSweeney’s decision to send him to Washington.”