Buyers are returning to the UK car market after a disastrous year that saw customer confidence hit an all-time low, says car dealership Pendragon.

The company, based in Annesley, Nottingham, said last year's rows over the cost of UK cars compared with those on the Continent had caused trading throughout the year to be significantly disrupted.

A campaign by the Consumers' Association followed by an investigation by the Competition Commission and a pricing structure implemented by the Government all caused widespread uncertainty in the market.

As a result shoppers held off buying cars to see if prices came down.

Despite this, Pendragon chief executive Trevor Finn said the company had turned in a creditable set of figures in a tough year.

Trading in December and January has been ahead of expectations and there are clear signs that consumer confidence is returning, he added.

The disruption contributed to a slump in the profits at the group, the UK's largest car dealership.

Pre-tax profits in the year to the end of December fell to 4.1m, compared with 19.2m last year. Turnover was also lower, at 1.15bn, against 1.75bn last time.

Though the Government had now acted, implementing a pricing structure for cars, it did not come into force until December and was too late to affect the results, Mr Finn added.