June 29 (Bloomberg) -- U.K. police dismantled two car bombs made from gas canisters, gasoline and nails that were left in the heart of London's West End shopping and theater district. Those responsible are still at large.

Police discovered the first bomb in a Mercedes parked outside a packed nightclub in the Haymarket, close to Piccadilly Circus, at 1:30 a.m. London time today. The second device was in another Mercedes nearby. Police only discovered it after the car was towed away for being parked illegally.

``These vehicles are clearly linked,'' Peter Clarke, the U.K.'s chief anti-terrorism officer, said at a televised news conference. ``Both devices were potentially viable. The discovery of a second bomb is obviously troubling and reinforces the need for the public to be alert.''

The incident prompted the biggest terrorism alert in London since authorities foiled an Islamist plot in August 2006 to blow up planes traveling from Heathrow airport to the U.S. Terrorists killed 52 people in the city on July 7, 2005, in suicide bombings on the subway and a bus. New Prime Minister Gordon Brown and Home Secretary Jacqui Smith met with the Cabinet's emergency committee, Cobra, after the first bomb was found today.

``Had it detonated it could have caused considerable loss of life,'' Smith told reporters.

The failed attacks raised concern about terrorism in the capital two days after Brown replaced Tony Blair as prime minister.

Security Threat

``We face a serious and continuous security threat to our country,'' Brown told reporters. ``This incident recalls the need for us to be vigilant at all times.''

President George W. Bush's homeland security adviser, Fran Townsend, met with Cabinet members today on the matter, and the U.S. offered Britain the assistance of the Federal Bureau of Investigation, according to White House spokesman Tony Snow. He briefed reporters in Kennebunkport, Maine, before a summit meeting there between Bush and Russian President Vladimir Putin.

The first London bomb was discovered after an ambulance crew, who had been called to deal with a sick woman at the Tiger Tiger nightclub, saw what they thought was smoke inside the green, four-door Mercedes parked outside, Clarke said. The club has a capacity of 1,770 people and was open until 3 a.m. for a ``ladies night,'' according to its Web site.

Police found the device in the back of the car and defused it manually. One of the canisters, labeled ``patio gas,'' was of the type used to hold propane to fuel barbecue grills and outdoor heaters.

Two officers risked their lives to defuse the bomb by hand, Sky News reported. ``I pay tribute to the courage and skill of the explosives officers,'' Clarke said.

Busy Area

``The vehicle was parked in one of the busiest areas of central London when many people were leaving nightclubs after an evening out,'' Clarke said, adding there were hundreds of people in the vicinity.

The second device was in a blue 280E Mercedes which was issued a parking ticket at about 2:30 a.m. on Cockspur Street, which is between Haymarket and Trafalgar Square. The car was then taken to a pound in Park Lane alongside Hyde Park an hour later, Clarke said.

Workers at the pound smelled gas coming from the car and called police, CNN said. Police found it contained very similar materials to the first, including a ``considerable amount'' of fuel, gas cylinders and large numbers of nails.

London Police Commissioner Ian Blair warned in February that ``vehicle-borne weaponry is, as we see from Baghdad, the greatest danger that we can face.''

Witness Account

Rajeshree Patel, who was in Tiger Tiger when it was evacuated, told the BBC she saw the first Mercedes parked at an angle by the front door with all four doors open and its headlights on. There were about 500 people in the club at the time, she said.

Plans for public events in London this weekend are being reviewed, Assistant Commissioner Tarique Ghaffur said in a televised statement.

Roads in the Haymarket area will remain closed indefinitely, police said. Piccadilly Circus Underground station is open, with exit restrictions. Some workers were unable to get to their offices.

``The police's reaction is loads bigger than anything we've seen before,'' said Scott Gavin, 33, a facilities manager at U.K. pension advisory company Punter Southall Group Ltd., who was locked out of his office on Jermyn Street.

Nightclub Targeted

Clarke said it was too early to say that the nightclub was the target, adding that the driver may have been headed to another location when he abandoned the car. Buckingham Palace, Trafalgar Square, Parliament and Downing Street are within a few minutes' drive. Police said they had no warning of an attack.

The area around the Haymarket includes the popular shopping thoroughfare of Regent Street, restaurants such as Planet Hollywood, TGI Friday's and the Hard Rock Cafe and outlets of HMV Group Plc and Virgin Group Ltd.

``The police did not have any advance intelligence of this, which is worrying,'' said Paul Wilkinson, chairman of the Centre for the Study of Terrorism and Political Violence at St. Andrew's University in Scotland. ``They will be concerned there might be other devices in the area or elsewhere in central London because if it is al-Qaeda, one of their characteristics is to set off coordinated devices.''

Westminster Security

Government offices in Westminster increased security today with workers being searched as they entered. Police put on extra patrols around the city and stepped up vehicle checks at the Wimbledon tennis championships.

Police are examining images from security cameras and devices used to enforce London's road-congestion charging program to try to establish the cars' route into central London.

If the first bomb had gone off, people inside the Tiger Tiger nightclub would have stood ``no chance,'' said explosives expert Andy Oppenheimer, editor of Nuclear, Biological and Chemical International.

``This looks as if it was something like propane. We are talking about highly incendiary qualities which would have made a big fire, probably destroyed buildings and caused mass fatalities,'' he said.

Since the Sept. 11, 2001, attacks in the U.S., the U.K. has faced a series of terrorist plots. British police forces have arrested more than 1,000 people under counter-terrorism laws, of whom more than 100 are awaiting trial.

Iraq Invasion

The U.K.'s decision to support the U.S.-led invasion of Iraq in March 2003 angered many in the country's Muslim community, and extremists have cited it as a reason to attack the U.K.

The government said the August 2006 plot to blow up airliners might have been deadlier than the Sept. 11 attacks on New York and Washington.

For the past 10 months, the Home Office has set the terrorist threat level to the U.K. at ``severe,'' the second highest, meaning that an attack was highly likely. During that time, police have been investigating about 30 terrorist plots.

In April, Clarke, who is deputy assistant commissioner of the Metropolitan Police, said al-Qaeda had survived attempts to smash its network in the U.K. He warned of a continuing ``deadly'' and ``enduring'' threat. About 200 networks comprising 1,600 identified individuals were being investigated, the U.K.'s domestic spy agency MI5 said in November.

2005 Bombings

The 2005 bombings took place the day after London won the right to host the 2012 Olympics. Two weeks later, an alleged suicide attack on London's transportation system failed. A trial of six men accused of involvement in that incident is under way.

Police said there were similarities to two similar plots involving either nightclubs or gas cylinders. Five British Muslims were convicted April 30 of plotting to carry out a deadly bombing spree across the U.K. using fertilizer bombs. Targets they discussed included the capital's Ministry of Sound nightclub.

In November, Dhiren Barot, an al-Qaeda trained terrorist, was jailed in the U.K. for 40 years after he admitted planning a series of bombings. One of his plans was to pack stretch limousines with gas cylinders, to be detonated underneath or alongside landmark buildings.

New York is strengthening its already tight security as a precaution, Mayor Michael Bloomberg told 770 WABC Radio.

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The U.S. government urged its citizens to be vigilant, although officials said they saw no potential terrorist threat there ahead of next week's Fourth of July holiday.

U.S. Assessment

``At this point, I have seen no specific, credible information suggesting that this incident is connected to a threat to the homeland,'' U.S. Homeland Security Secretary Michael Chertoff said in a statement. ``We have no plans at this time to change the U.S. threat level.''

There was little market reaction in London to the discovery of the car bomb. U.K. government bonds, or gilts, erased this morning's gains as British consumer lending and mortgage data prompted the market to raise bets for higher borrowing costs. Against the dollar, the pound earlier rose to its highest since May 1.

The benchmark FTSE 100 Index added 36.60, to 6607.9 at the close in London. The measure earlier slid as much as 0.8 percent on concern about U.S. economic reports.

To contact the reporters on this story: Scott Hamilton in London at shamilton8@bloomberg.net; Nick Allen in London at nallen14@bloomberg.net.

Last Updated: June 29, 2007 18:33 EDT