BASRA, Iraq, June 5 (Reuters) - The reduction of British forces in southern Iraq to about 5,500 soldiers is almost complete, a British military spokesman said on Tuesday.

Major David Gell said the reduction from about 7,000, as announced by British Prime Minister Tony Blair in February, would be achieved by the rotation of a smaller brigade into Iraq and not by pulling out any troops.

One Mechanised Brigade took command on June 1 from 19 Light Brigade and the handover process should be completed in days, Gell said.

"This is the period when the reduction of troops will take place. We will be down to that number (about 5,500) in a short space of time ... within days," he said.

The next step will be for British forces to pull out of Basra Palace, their last post inside the oil port city of Basra, and move to Basra airport on the outskirts, which will become the sole remaining British military base in southern Iraq.

Gell reiterated there was no timetable for a handover to Iraqi security forces in the volatile city, where rival Shi'ite militias are fighting a turf war for control of its lucrative oil revenues.

"Our military planners routinely look at a range of options. There is no timetable, it is conditions based," he said.

Much would depend on the capabilities of the Iraqi army to take control of the city, Iraq's second biggest, he said. "They are becoming more capable and confident, taking on more operations by themselves."

While Basra has not experienced the same levels of violence as in Baghdad, British forces have been under almost daily mortar fire and their patrols hit by roadside bombs.

April was the bloodiest month for British forces in Iraq since the U.S.-led invasion in 2003. Some analysts have suggested the militias have stepped up their attacks so they can claim victory when British forces eventually pull out.

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