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Companies have been given the green light for testing driverless cars in the UK next year.

The decision was announced by government quango Innovate UK, after George Osbourne's Autumn Statement.

Bristol, Greenwich in south east London and Coventry and Milton Keynes will all host autonomous driving projects that will run for between 18 and 36 months starting from January 2015.

The future? Companies have been given the green light for testing driverless cars in the UK next year. Bristol, Greenwich in south east London and Coventry and Milton Keynes (illustrated) will all host autonomous driving projects that will run for between 18 and 36 months starting from January 2015

It is hoped that testing driverless cars in a real-world environment will help lead to greater levels of understanding of the vehicles and will allow the public to imagine how the cars could fit into everyday life.

Milton Keynes and Coventry will share the UK Autodrive programme, which involves Ford, Jaguar Land Rover as well as a number of universities and engineering consultancies.

They will test self-driving cars on real roads as well as lightweight self-driving pods designed for pedestrianised areas in Milton Keynes.

One of the focuses of the trial will be developing infrastructure to best interact with the cars.

Tim Armitage, of engineering consultancy, Arup, told the BBC: 'Our plan with the practical demonstration phases is to start testing with single vehicles on closed roads, and to build up to a point where all road users, as well as legislators, the police and insurance companies, are confident about how driverless pods and fully and partially autonomous cars can operate safely on UK roads.'

In Greenwich, the Gateway project will test automated electric shuttles buses, plus robotic valet parking for driverless cars. 

The scheme involves General Motors, the AA and RAC.

Finally, experts in Bristol will investigate the insurance implications of driverless vehicles and study the public's response to the technology.

The Venturer consortium programme 'aims to deepen understanding of the impact on road users and wider society and open up new opportunities for our economy and society,' Innovate UK said.

The hilly city's challenging terrain will also allow engineers to see how the cars cope with busy, winding roads.

Milton Keynes and Coventry will share the UK Autodrive programme (pictured), which involves Ford, Jaguar Land Rover, universities and engineering consultancies. They will test self-driving cars on real roads as well as lightweight self-driving pods designed for pedestrianised areas in Milton Keynes

It's hoped that the data collected will be used to successfully introduce driverless cars in cities and towns across the UK to reduce congestion, improve air quality and use roads more efficiently and safely.

The chancellor announced an extra £9 million in funding for the new technology, adding to £10 million already promised in the summer.

In Greenwich, the Gateway project will test automated electric shuttle vehicles (pictured), plus robotic valet parking for driverless cars. The scheme involves General Motors, the AA and RAC

Experts in Bristol (pictured) will investigate the insurance implications of driverless vehicles and study the public's response to the technology. The hilly city's challenging terrain will also allow engineers to see how the cars cope with busy, winding roads

The aim is to establish the UK as the global hub for the research, development and integration of driverless vehicles and associated technologies.

'Cars that drive themselves would represent the most significant transformation in road travel since the introduction of the internal combustion engine and at Innovate UK, we want to help the UK to lead the world in making that happen,' said Nick Jones, lead technologist for the low carbon vehicle innovation platform at Innovate UK.

'There are so many new and exciting technologies that can come together to make driverless cars a reality, but it's vital that trials are carried out safely, that the public have confidence in that technology and we learn everything we can through the trials so that legal, regulation and protection issues don't get in the way in the future.'

Paula Marie Brown from the Institution of Engineering and Technology (IET) said: 'Driverless vehicles have huge potential to transform the UK's transport network. They could improve road safety, reduce congestion and lower emissions.

The trials will allow experts to tackle the question of driver responsibility. Ms Brown from the IET said: 'The trials will also need to address liability in the case of an accident. Today the car driver is liable, but in the future will it be the car manufacturer or owner – and how will insurance companies adapt to this?

'But there are new levels of risks that need to be considered when there is a combination of driverless and driven vehicles on the roads.

'To ensure a safe system of operation, the driverless car test trials require not only a good level of user skill and experience, but the user should also be able to demonstrate a good understanding of the systems in the car, the potential failure modes, how faults are indicated and most importantly how they will take swift and decisive control of the vehicle if they suspect there is a fault.

'The trials will also need to address liability in the case of an accident. Today the car driver is liable, but in the future will it be the car manufacturer or owner – and how will insurance companies adapt to this?

'As a minimum, when approving automated vehicle testing on public roads, manufacturers must accept that software in their vehicles attracts the same liability as the physical components of the vehicle.

'Perhaps the biggest question mark will be around cyber security. The reliability and security of software used in driverless cars will be a major cause of concern for manufacturers and insurers.

'If hackers found a way to target vehicles, this could present a whole new set of challenges that the industry is not currently equipped to tackle.'