The British government has said it could hand back Basra province to Iraqi control early next year, setting a date for a major step towards reducing Britain's presence in Iraq.
"The progress of our current operation in Basra gives us confidence that we may be able to achieve transition in that province ... at some point next spring," Foreign Secretary Margaret Beckett told parliament.
Britain, Washington's biggest ally in the Iraq war, has so far refused to be drawn on when troops might withdraw despite widespread criticism of Britain's involvement which has savaged Prime Minister Tony Blair's popularity ratings.
But with President George W. Bush now rethinking strategy in Iraq after a crushing U.S. mid-term election defeat, Blair has room to try to improve his standing at home before he steps down next year by detailing possible Iraq exit options.
Britain's troops are stretched as its soldiers in southern Afghanistan find themselves facing a revitalised Taliban and engaged in bloody combat, which Blair said this week was a vital battle for world security.
Britain has 7,200 troops in southern Iraq, mostly stationed in and around Basra. The city, Iraq's second biggest, remains dangerous with Shi'ite factions battling each other for control and British troops sometimes targeted.