The UK got its first look at the Alfa Romeo 147 at the motor show before it goes on sale next year. Designed by Alfa Romeo Centro Stile, the 147 continues the styling themes of recent Alfas and will be available in the UK with 120bhp and 150bhp Twin Spark 16-valve engines.

The chassis and suspension is developed from the 156 saloon, and Rob Hatfield, fleet director of Alfa Romeo and Fiat, believes the car will present a strong challenge to established upmarket hatches like the Volkswagen Golf and Audi A3.

He said: 'We have just held the 147 dealer launch and 50 fleet customers have already tried the car. We are following the same route as we did with the 156 - our volume aspirations for that car were not massive and we will continue that with the 147.

'We do not see it as a Ford Focus rival - as far as we are concerned it competes with the Volkswagen Golf, Audi A3 and possibly BMW 3-series Compact. We will not have the volume to compete with the Focus - and the Fiat Bravo and Brava fill that sector of the market. The 147 is 'elite' C-segment.'

Initially, residual values for the 156 appeared strong, but have not been able to match rivals from BMW and Audi. But Hatfield said they have shown signs of recovery following Alfa's price cut in April.

He said: 'Residual values on the 156 came down because people realised they could go to Europe and buy them cheaper. I think the kind of person who would buy a 156 is one who would go to Europe to buy the car cheaper. This affected residual values, but since our price realignment in April we have has a positive response from the fleet industry.

'We have made it a relatively cheap car - for example now you can buy a Ford Focus for the price of a 156 - and have been pleasantly surprised by the results.