British troops began pulling out of Basra Palace last night and expect to hand control of the base to Iraqi forces within days, amid new Anglo-American recriminations about the aftermath of the Iraq war.

The UK battlegroup in Saddam Hussein's former compound comprises about 500 troops and their redeployment to the city's airbase is the penultimate stage of Britain's presence in the country.

Their withdrawal will be followed by the handover of the city itself to the Iraqi authorities in the autumn, the Ministry of Defence said.

The MoD statement released last night said: "Handing over Basra Palace to the Iraqi authorities has long been our intention, as we have stated publicly on numerous occasions. We expect the handover to occur in the next few days.

"The Iraqi security forces want to take full responsibility for their own security and the handover is a step towards that goal. The decision is an Iraqi-led initiative and is part of a coalition-endorsed process, developed in consultation with the Iraqi government, and follows the successful handover of several other bases within and around the city."

The symbolic withdrawal marks the latest phase of Britain's disengagement from the conflict and will be seen as significant given the recent discord between the UK and US on Iraq.

"Iraqi forces are already deployed and concentrated in the palace," General Mohan al Fireji, a senior Iraqi commander, said at a press conference in the southern city. "The Iraqi forces are ready to take security responsibility in Basra."

The prime minister, Gordon Brown, has come under increasing pressure to announce a timetable for the complete withdrawal of UK troops from Iraq - but has refused to do so.

The shadow defence secretary, Liam Fox, said: "This is not an unexpected move, but the families of the service personnel involved will want to know that every possible precaution has been taken to maximise their safety during this period.

"Our troops must not be put at needless risk to satisfy the political needs of Gordon Brown's government, any moves must be based upon the military reality on the ground." The Liberal Democrat leader, Sir Menzies Campbell, said: "The inevitable retreat from central Basra underlines the futility of the continuing British presence in Iraq. "We have heard from the most senior British military voices their concern about the lack of post-invasion planning.

"Nothing confirms that more than the fact the British troops will now be confined to Basra airport, an area which is impossible to defend and from where they cannot conceivably carry out any useful military function other than training the Iraqi army."

Transatlantic strains over Iraq continued at the weekend with an attack on the US from a second retired British general. Major General Tim Cross, the deputy head of the coalition's Office of Reconstruction and Humanitarian Assistance, denounced Washington's postwar policy as "fatally flawed".

He insisted he had raised serious concerns about the country sliding into chaos with Donald Rumsfeld, the US defence secretary at the time, but he had "dismissed" the warnings.

"The US had already convinced themselves that Iraq would emerge reasonably quickly as a stable democracy," he told the Sunday Mirror. "Anybody who tried to tell them anything that challenged that idea - they simply shut it out."

On Friday Major General Sir Mike Jackson, head of the army in 2003, called the American approach "intellectually bankrupt". Sir Mike also singled out Mr Rumsfeld for criticism, saying his claim that US forces "don't do nation-building" was "nonsensical".

An MoD spokesman said last night that both men had served their country and were entitled to their opinions.