Members of one of Northern Ireland's largest loyalist paramilitary groups could be freed from prison early after the British government moved on Wednesday to recognise a ceasefire it declared last year.

Northern Ireland minister Shaun Woodward said the Ulster Volunteer Force (UVF) would be "despecified", meaning members jailed for offences committed before a 1998 peace deal could become eligible for early release. Many paramilitaries from both sides have already been released on licence since 1998.

The government added the UVF to a list of specified groups not observing a recognised ceasefire in 2005 after it feuded with the rival Loyalist Volunteer Force (LVF), but the UVF declared an end to violence in May 2007.

The UVF killed more than 540 people during the 30-year conflict in the province, making it the most lethal of Northern Ireland's pro-British paramilitary groups.

"Their (the UVF's) statement of last May committed the organisation to assuming 'a non-military civilianised role'," Woodward said in a statement.

"In acknowledgement of their commitment and additional factors, I have therefore concluded that there are sufficient grounds to de-specify the UVF/RHC (Red Hand Commando)."

Northern Ireland is hoping to woo foreign investors after political foes agreed last year to share power in a regional government. That cemented the 10-year-old Good Friday agreement that largely ended decades of violence in which over 3,600 people were killed.

Sectarian tensions persist, however, and sporadic violence continues. Both loyalist groups and armed republican dissidents continue to be involved in paramilitary and criminal activities.

An off-duty police officer was seriously injured in an explosion on Monday and police said dissident republican groups were the main line of inquiry.

Woodward also said on Wednesday that he intended to specify the dissident republican group Oglaigh na hEireann.

Several other paramilitary groups also remain on the specified list, including nationalist factions the Continuity IRA and the Real IRA and the pro-British LVF.