What is it? 

BMW's new entry-level hatchback, packed with more gadgetry than ever, including new engines and lots of 'big car' kit, but still rear-wheel drive and still a decent drive. Prices start at £19,375 for the basic 116i ES with sales kicking off in September. 

Technical highlights? 

The whole car is 85mm longer and the chassis gets a 30mm stretch in the wheelbase, plus wider front and rear tracks and new damper mountings for the McPherson struts, claimed to give the suspension more compliance. 

Only a limited engine range will be available from launch with 1.6-litre petrol and 2.0-litre diesel 'Twinpower' motors that use variable valve timing and a clever Twin Scroll turbo that makes more efficient use of the exhaust gases. 

We tried the fastest petrol from launch, the 170bhp 118i, which does 0-62mph in 7.4 seconds, has plenty of low-down torque yet likes to rev and returns (an official) 48mpg combined. It's a great unit. 

As for transmissions, there's a new eight-speed automatic gearbox too, which is swift, efficient and comes with steering wheel paddles, but it costs £1,600 so we'd stick with the notchy but precise six-speed manual. 

All cars come with Drive Performance Control, which gives you four ‘modes’ to choose from. These include Comfort – the standard setting – and Sport – which sharpens the steering, throttle and suspension, while Sport + allows more rear wheel slip.  The fourth is ECO PRO, which helps save fuel, by adjusting throttle response and limiting use of the air-con, heated mirrors and seats. The idea is that it helps boost economy without you even realising it. 

Inevitably lots of big car gadgets have migrated from further up the BMW range, including lane departure warning, adaptive cruise control and Internet access (all available as options.) UK buyers can add Adaptive M Sport suspension for an extra £750 too. 

What's it like to drive? 

Much better than the old car, which suffered from overly heavy steering and never felt as engaging as it could have done. The new electric power steering system is one of the best so far, telling you all you need to know about what the front wheels are doing. 

It's a decent steer, too - with keen turn-in and well contained body roll. On a twisty, bumpy road the 1 grips hard and feels impressively agile. BMW says that its engineers visited north Wales during the car's development to tune the suspension for the unique challenge of British tarmac. And on first impressions it seems to have worked – springing is still on the firm side but even cars with Sport suspension are far better than the outgoing model, although we'll reserve judgement until we get one here. 

Factor in refined motorway manners and a great driving position and the 1-series promises to be a pleasure to drive even when you aren't going for it. 

How does it compare? 

Well, at the moment it looks set to go straight to the top of its class, although both of its compact premium rivals - the Audi A3 and Mercedes A-Class - are on the verge of receiving their pensions. Of course, for those prepared to forego a posh badge the 1-series also faces some very tough competition from the hot hatch elite, especially given its steep pricing.

Anything else I should know? 

Despite that increase in wheelbase, it's still pretty cramped in the back – a Golf is far more spacious. BMW has made a big effort with personalisation, though, offering two new Urban and Sport trims. We'd go for the former, as it gets sports suspension and 17-inch alloys among other items. Urban looks very 'European' with its dubious white wheels and white wing mirrors/grille slats. 

Most buyers will go for the M Sport version, though, which comes with a bodykit and M-badged kit such as wheels, steering wheel and seats.

From 2012, a 99g/km 116i is launched which will be a boon for company car drivers. After that, expect the three-door 1-Series to arrive later in the year, but don't hold your breath for a Coupe or a Convertible - they aren't due until 2013 at the earliest. Don't even ask about a replacement for the just-launched 1M Coupe – that will happen engineers say, but it's years away.