Two suspected terrorists "brutally murdered" a soldier in broad daylight in London this afternoon, prompting a major emergency response from the British Government.

One of the men behind the attack in Woolwich, south east London, was filmed wielding a bloodied meat cleaver and saying, "We swear by almighty Allah we will never stop fighting you", in footage shown on ITV News.

One Whitehall source said the attackers, who are now being treated in hospital after being shot by police, were heard to shout "Allah Akbar" during the assault.

British Prime Minister David Cameron is cutting short his participation in an EU summit to return to the capital

Witnesses said the victim, who a local MP said was a soldier, was hacked to death, with some suggesting his attackers tried to behead him. Unconfirmed reports said they also filmed the attack.

Home Secretary Theresa May said: "I have been briefed by the Metropolitan Police Commissioner and the Director General of the Security Service.

"It has been confirmed to me that a man has been brutally murdered this afternoon in south-east London. Two other men were shot by armed police and they are currently receiving treatment for their injuries.

"I have called a COBR (Cabinet Office Briefing Room) meeting where I will receive further briefing. This is a sickening and barbaric attack."

David Cameron described the attack as "truly shocking".