Reporters from the Sunday Times posed as lobbyists for a consortium of American companies wanting to secure FIFA's vote for the U.S. and targeted two executive committee members who are now under investigation for corruption.
"It is correct to assume that the article has caused some significant damage to us," said the source, who spoke to Reuters on condition of anonymity.
"It would be far better for us not to have any issues with our own media, but we believe the position is recoverable. The next two or three weeks are going to involve a lot of work in turning this situation around, but we feel we have a great bid and that FIFA will judge it on its merits and are not put off by a newspaper story."
England are facing a challenge from Russia, and joint bids from Spain/Portugal and Belgium/Netherlands to host the finals. FIFA will make its decision in Zurich on December 2.
Last month's Sunday Times story named Amos Adamu from Nigeria and Reynald Temarii from Tahiti as the two executive committee members who were prepared to sell their votes for cash.
FIFA INVESTIGATION
The two men, who have denied any wrongdoing, have been suspended by FIFA and are the subject of an investigation by the body's ethics committee which is meeting from Nov. 15-17 before publishing its findings.
Adamu is accused of asking for 500,000 pounds - half paid in advance - to build four artificial football pitches in his home country.
Temarii, a FIFA Oceania confederation vice-president is alleged to have requested 3 million New Zealand dollars ($2.36 million) for a sports academy to be built at the OFC's headquarters.
The campaign source said England's bid could recover from the crisis, but thought a BBC programme about FIFA which could be shown the week before the vote would prove highly damaging.
"People from around the world cannot understand why on the one hand, the British Government, and all the opposition parties are totally behind the bid, while the BBC, effectively the state-run TV channel, would broadcast a programme that could scupper it," the source said.
"We do not want FIFA members to feel they are being persecuted by the English media, that is not the case at all."
BLATTER CRITICAL
FIFA president Sepp Blatter was critical of the newspaper's role last week, when he told reporters after an executive committee meeting in Zurich: "One can ask whether such an action is appropriate, trying to set traps for people. It is a deeply rooted problem with the English media.
"Who is benefiting from this situation and who is being harmed, we are asking ourselves why did it happen and why did it happen specifically by English journalists? We are looking at that."
The president of the Asian Football Confederation (AFC), Mohamed Bin Hammam of Qatar, used his blog to criticise the Sunday Times investigation when he wrote: "Is it ethical to use unethical methods to protect the ethic? How will we clean dirty laundry by
