Yesterday grim footage apparently showing a British engineer kidnapped from a house in Baghdad last week along with two American colleagues surfaced in a video released in the Iraqi capital. The group holding the three threatened to execute them unless Iraqi women prisoners are released from jail.
And last night it was reported that 10 more staff working for an American-Turkish company had been seized as hostages.
There are now fears that scheduled Iraqi elections in January will have to be delayed because of the growing instability.
Last week Geoff Hoon, the Defence Secretary, said that more troops could be sent to safeguard the polls if necessary, although Whitehall sources said there was no guarantee that they would be British.
The reduction will take place when the First Mechanised Infantry Brigade is replaced by the Fourth Armoured Division, now based in Germany, in a routine rotation over the next few weeks.
Currently there are 8,000 British troops in the 14,000-strong 'multinational division' in southern Iraq, which has responsibility for about 4.5 million people.
Iyad Allawi, the interim Iraqi Prime Minister, will hold talks with Tony Blair at Chequers tomorrow on security issues, including elections and the strengthening of border patrols.
News of the troop withdrawal comes at a difficult time for Blair, with the publication yesterday of leaked documents suggesting that he was warned a year before the invasion that it could prompt a meltdown.
However Tessa Jowell, the Culture Secretary and a close ally of Blair, told The Observer that the Prime Minister still believed that Britain's actions would be justified by the restoration of democracy 'however difficult and remote a prospect that seems at the moment, when our headlines are crowded with further attacks by the insurgents'.
In another embarrassment for the Prime Minister, a draft report from the Iraqi Survey Group, set up to investigate Saddam Hussein's weapons programme, has concluded that the former dictator's only chemical or biological armament was a small amount of poison for use in political killings.