At least 120 people are feared dead, with 450 wounded, after four days of fighting between Iraqi government forces and Shia militants, which also saw US planes bomb the city in a bid to calm the uprising.
Defence sources have stressed that a plan by Gordon Brown, the Prime Minister, to cut numbers from around 4,000 to 2,500 will only go ahead if supported by army generals in Iraq.
An update on how many troops will replace those deployed in December on a six-month tour of duty is expected in the next week.
Last night, a source said: "We're no longer talking about reducing to 2,500 at this time."
An increase in combat troops – rather than medics and training specialists – would indicate a readiness to re-engage with insurgents.
The news came as senior MPs said there was a need to retain a "critical mass" of UK forces outside Basra for their own protection and to enable them to continue to provide back-up to the fledgling Iraqi forces.
UK troop numbers have fallen dramatically from the 46,000 who took part in the 2003 invasion. Those remaining are on "overwatch" duties, having decided last September to withdraw from front-line combat to their base near Basra airport.
The current number of UK armed forces in Iraq was put at 3,800 in a parliamentary written answer released yesterday, having stood at 7,100 last year.
But, when asked to set out the plan for reducing forces further over the next year, Bob Ainsworth, the Armed Forces minister, said:
"We are unable to provide a month-by-month projection for the next 12 months.
"Our plans will be guided by the advice of our military commanders and are subject to conditions on the ground."
Sir Menzies Campbell, the former Lib Dem leader and a fierce opponent of the war, said: "There is a real doubt as to whether even the existing number of troops could be militarily effective. In all these operations, there is a critical mass and 4,100 seems to me to be below it."
David Hamilton, a Labour MP on the Commons defence committee, said: "You have got a situation where a critical-mass factor comes into operation. I don't think they would be able to maintain what they do with less people there. I don't think a reduction is a feasible option."
He added a longer-term withdrawal was desirable as Britain was unable to continue fighting in both Iraq and Afghanistan.