Lawyers currently investigating legal action on behalf of thousands ofUK Volkswagen owners have called on the German car company to confirm how UK customers will be compensated after reports suggest that VW had reached a deal with the US Government, and private lawyers, to pay more than one billion dollars (GBP700 million) to compensate VW owners in the US.

Bozena Michalowska-Howells from the Consumer Law and Product Safety group at Leigh Day, who is representing the VW customers in the UK, welcomed news of the "deal in principle" but insisted that the car company compensate all its customers, not just those in the US, where the potential for punitive damages could run into hundreds of millions if the cases went to Court.

Ms Michalowska Howells said: “ it is clear that whatever damages apply to US customers, should apply to VW customers across the world, in all the countries in which Volkswagen operates.

"The damage to the brand has been huge but they could build bridges if they would only enagage with their UK customers and put many people’s minds at rest.

"However VW’s responses to our letters of claim have been unsatisfactory we are thus in the process of preparing group action court proceedings."

According to PA, the deal being worked out in the US includes the car maker buying back some of the nearly 600,000 diesel cars that cheat on emissions tests.

However, the final details, including how much each owner would get, are still being worked out, according to a source briefed on the matter.

The news comes as Japanese car manufacturer Mitsubishi admitted manipulating fuel economy tests in Japan. It is reported that around 600,000 vehicles sold in Japan are affected including about 468,000 vehicles that were made for Nissan.

The models affected include Mitsubishi’s ek Wagon and ek Space as well as Nissan’s Dayz and Dayz Roox. All affected models are “mini-cars” with 660cc petrol engines.

Company bosses confirmed that the manipulation was the result of a deliberate act by some of its employees and involved the artificial over-inflating of tyres during laboratory tests. Whilst there has been no official comment, the manipulation of fuel economy data is also likely to have a knock-on impact on CO2 emissions if correct.

Owners of affected vehicles would have sustained increased fuel costs and their vehicle which have caused greater harm to the environment than they were told to expect.

However, at present the difference between the advertised and the actual MPG figures is not known; making it impossible for this to be quantified. A statement issued by Lance Bradley, managing director of Mitsubishi Motors in the UK, sought to reassure consumers that there was no evidence that to suggest that UK or European models were affected.

Company bosses speaking in Japan confirmed that a similar testing method was used in the US and that vehicles sold in other markets were now be looking into. If the practice is found to extend to vehicles sold in the UK, owners of vehicles affected by the scandal may be able to bring a claim for compensation.