A van driver who was investigated for links to Islamist radicals has attacked a gas factory near the south-eastern city of Lyon, a French prosecutor says, according to BBC News.

Yassin Sali, 35, caused an explosion by ramming his car into an area containing flammable liquids and was arrested at the scene, Francois Molins said. Sali's boss, the owner of a delivery firm, was found beheaded alongside flags containing Arabic inscriptions.

The attack put France back on to its highest terror alert. An investigation has been launched by French anti-terror police.

President Francois Hollande ordered security in the region to be tightened to the highest possible level for the next three days.

He said earlier: "We have no doubt that the attack was to blow up the building. It bears the hallmarks of a terrorist attack."

Speaking to reporters before flying back from an EU summit in Brussels, he reflected on the fact it would remind people of the attacks in and around Paris in January that killed 17 people.

"We all remember what happened before in our country. There is therefore a lot of emotion," he said.