The majority of Britain's combat forces will be withdrawn from Iraq by next May.

Senior defence sources have said that only 'a few hundred' will be left to finish training Iraqi forces.

Security conditions have improved markedly in the southern city of Basra - largely thanks to an Iraqi and U.S. drive to oust hostile militias earlier this year after UK forces withdrew from the city last year.

Withdrawal: The majority of British soldiers, seen here in Basra, are expected to pull out by May

Commanders now hope the British mission can be wound down by next summer.

Controversy still surrounds the UK's military contribution in Basra, with critics claiming the British force was too small and failed to maintain command of the city.

Control was left largely in the hands of insurgent militia groups when the last UK units stationed within the city withdrew before Christmas.

Nouri al-Maliki, the Iraqi Prime Minister, dispatched 30,000 Iraqi troops - along with almost 1,000 American mentors and trainers - to sweep through Basra in March this year.

They took control from the militias in several days of fierce fighting while UK forces that had remained outside the city stayed at their airport base.

Senior British insiders have said the base could now close within months if security continues to improve.

Insurgency: Members of the Mahdi army on parade in Basra. It has taken months to stabilise the town

Today the Ministry of Defence remained reluctant to set a firm timetable for the withdrawal of the remaining 4,000 UK troops from Iraq, but confirmed that it hoped the force would 'decrease significantly' next year.

Major General Barney White-Spunner, who has just returned from six months in command of UK forces in southern Iraq, said he was confident that Basra's fortunes were improving dramatically.

He described the city as happier and more secure, pointing out that house prices have doubled since spring thanks to an influx of Iraqi and foreign investors.

Restaurants and shops were opening and Christians and Sunni Muslims have begun returning to the Shia-dominated city, which has an 'extremely bright future', he added.

Senior British commanders are anxious to scale down their Iraq commitment as soon as possible in order to ease the demands that have overstretched the forces in the past few years.

America is now hoping to pull its own forces out of Baghdad and other areas of the country within three years.

British troops struck a secret deal late last year with Shia militias loyal to the radical cleric Moqtadr al-Sadr, under which it is believed UK troops withdrew to the airport but were not attacked as they left.

Operation Charge of the Knights was launched in March to take control of Basra.

The ensuing fighting claimed hundreds of lives, yet for almost a week UK forces were confined to their airport base.

The incident dented Britain's standing with the Iraqi regime and the U.S. military, but officials insist relations have been restored.