He told Kelly Fry, who worked at his car-clamping business, that he abducted the 13-year-old and then set fire to his car to hide the evidence, the People newspaper reported.

At the time she assumed he was joking because he often made distasteful comments - but later she went to the police.

Milly disappeared while returning from school to her home in Walton-on-Thames, Surrey, in March 2002. Her skeletal remains were discovered six months later 30 miles away on Yateley Heath in Hampshire.

Bellfield was told last week he would die in jail after being found guilty of murdering students Marsha McDonnell, 19, and Amelie Delagrange, 22. But he remains the prime suspect in Milly's abduction and murder.

Police linked him to the schoolgirl's kidnapping because his then-girlfriend Emma Mills lived nearby, and they are desperate to trace her car after it was captured on CCTV at the scene.

It is also believed Bellfield may have known Milly because the daughter of a former girlfriend of his once went to school with her.

Ms Fry recalled sitting in a car in Walton with Bellfield in August 2002, just yards from where the teenager had been snatched five months earlier.

She told the People: "He pointed out his old flat and said he had had to move out of it and lost £900 in rent he'd paid upfront.

"Then he said he'd had to set fire to his car. When I asked why he said, 'Because I took that girl'. I knew he meant Milly and it revolted me he was talking like that - but I never believed him."