Police in London have confirmed that a second car bomb was found in a car that had been towed to a car pound by council officials last night.

Just before 9pm tonight, it was confirmed that the bomb materials in the second car were similar to those found in the first overnight.

Both cars were Mercedes, and each contained a considerable amount of explosive material and nails, police said.

They had been left within a short distance of each other in Haymarket and Cockspur Street, in a busy area of restaurants, bars and nightclubs in central London last night.

A parking ticket had been issued in relation to the Cockspur Street car at about 2.30am, and it was towed to a pound at Park Lane about an hour later.

Deputy Assistant Commissioner Peter Clarke said the two were clearly linked.

A third car, which had aroused suspicion in the Fleet Street area earlier this afternoon, was ruled out of police enquiries later.

The was considerable traffic disruption during the day while parts of the British capital were cordoned off to facilitate the investigation.

Home Secretary Jacqui Smith said the UK was currently facing a most serious and sustained threat.

Police confirmed that a large quantity of nails, petrol and cylinders was found in the car and said that had the device detonated there would have been significant injury and loss of life.

In a news conference this afternoon, the head of Scotland Yard's counter-terrorism unit, Peter Clarke, warned that it was too early to speculate on who may be behind the bomb. 

Mr Clarke also called on the public to remain vigilant.

Explosives officers were called to examine a car in Haymarket in central London after a member of the public reported a suspicious vehicle shortly before 2am.

Witnesses reported seeing the car driving erratically before crashing into bins by the side of the road. The driver then escaped on foot.

It is understood a passing ambulance crew reported seeing smoke inside the vehicle. Police were alerted and a controlled explosion was carried out on the car.

British Prime Minister Gordon Brown said the discovery of the bomb showed Britain continued to face a serious and continuous threat.