David Cameron has welcomed his Turkish counterpart to Downing Street for talks on how to deal with the threat posed by Islamic State (IS).

The Prime Minister and Ahmet Davutoglu were discussing the "terrible situation" with IS, also known as Isil, in Turkey's neighbours Iraq and Syria.

It came as a video purportedly from the terror group emerged in which two Japanese hostages were threatened with execution by a masked man, thought to be 'Jihadi John' unless a ransom demand is paid of $200,000 (£131,000)

Mr Davutoglu said that Turkey and Britain would stand "shoulder to shoulder" in addressing the challenges facing Europe.

Speaking in No 10 Mr Cameron said that at the top of the agenda was "the battle that we have fighting extremist terror and the terrible situation we see with Isil and also the need for transition in Syria".

The crisis in Ukraine and trade links between the UK and Turkey were also being covered during the talks at No 10.

The Prime Minister said: "There's a lot that we have to work on. The economic and business relationship is very strong, trade is growing, investment into each other's countries is very positive and there's lots to talk about on that front.

"We are both members of Nato and so we need to discuss the importance of standing up to Russia over Ukraine, I think it is very important."

The Turkish prime minister hailed the two countries' "strategic co-operation against any type of threat against international and regional peace".

He added: "The future of our continent now faces many challenges: terrorism, racism, other types of challenges against our countries, Turkey and Britain, I'm sure will be shoulder to shoulder."

The meeting will build on talks between the two prime ministers and Turkish president Recep Tayyip Erdogan in Ankara last month.

The US and the EU have been encouraging Turkey to take a more active role in tackling IS on its borders.

There have also been calls for more help in tracking Britons travelling to the region to fight.

Downing Street said the issue of passenger name records for flights from the region would be discussed, along with the Government's plans for temporary exclusion orders to prevent terror suspects returning to the UK.