According to the Consumers' Association, manufacturers place obstacles in the way of people trying to buy cars more cheaply from Europe.

The organisation - publishers of Which? magazines - has compiled a report involving secret video footage shot at dealerships in the UK.

Consumers' Association Director Sheila McKechnie said: "UK car dealers, having divided up the lucrative UK market between them, seem determined not to lose trade by helping customers buy cheaper cars from abroad.

"Consequently, consumers are being subjected to a form of price fixing."

The report, which is part of the consumer organisation's on-going campaign to reduce car prices in the UK, is being presented to the Department of Trade and Industry at a select committee inquiry into car pricing.

Researcher Andrew Fisher, who has been compiling the report, said: "We've been working really hard on pulling all the evidence together and hope it means that the Office of Fair Trading and the European Commission will fine offending manufacturers."

Cars in Britain are between 10% and 60% more expensive than they are in Europe.

Under EC rules car buyers willing to make the effort can legally go abroad and buy from a European dealer or can get a UK dealer to import one for them.

One of the reasons cars are cheaper on the continent is that VAT is higher there. VAT in Britain is 17.5%, in Belgium 21% and in Holland 40%.

Manufacturers are forced to cut profits to compensate for these high rates. But a UK resident can buy a car at the basic price and then pay the VAT of 17.5% when it is imported to Britain.

Dealers 'mislead' customers

Manufacturers make much greater profit on cars sold direct in Britain. The Consumers' Association says that because of this UK car dealers give "inaccurate information" and "mislead" consumers on why they would be better off with a more expensive UK model car.

The organisation claims that manufacturers make servicing or sourcing of spares difficult or frighten customers by exaggerating minor technical differences.

Even if a customer deals direct with a dealer on the continent they can encounter problems. Some consumers in Britain have found it particularly difficult to buy luxury cars on the continent.

Watchdog investigates

Earlier this year the BBC's consumer affairs programme Watchdog investigated the problem. It asked David Sumner-Smith of Autocar magazine to find out if it was possible to buy a cheaper car in Europe for export to the UK.

He contacted six BMW dealers in Holland and Belgium. Three refused to sell him a car while three others said he could have a car but delivery would take up to 10 months. He also contacted 10 Mercedes dealers in Holland and Belgium - all refused to sell him a car for export.

If they are caught blocking sales by dealers on the continent manufacturers can be fined by the European Commission. In January 1998, Volkswagen-Audi was fined £67 million.

Dealers 'welcome' lower prices

Car retailers and manufacturers are also giving evidence at the government inquiry.

Alan Pullman, the Director of the National Franchised Dealers Association, said he supported a better deal for customers and stressed one of the reasons cars were much cheaper in Europe wasdue to the strong pound.

"Overall we would welcome lower car prices in the UK," he said.

"Some element of this is due to currency - two years ago Britain had some of the cheapest cars in Europe."

Mr Pullman said that one way to ensure that the ordinary retail buyer gets a better deal would be to make sure they are offered the sort of packages enjoyed by the company car market in the UK.