I have colour sanded my car down to 2000 wet & dry the panels are in perfect condition but when I machine polish with compound I am left with the panel full of small craters and the more I polish the worse it gets

Post some pictures of what you are dealing with.
It is very hard to give advice without seeing exactly what the problem is.

Hi tryed taking a photo but can't find it see, the panel is perfectly flat and after polishing is like the moon.

Without pic.s we are guessing.....solvent pop, fisheye, still remaining orange peel, lots of things can be happening......

Will try wife's phone tomorrow thanks

Best photo I can get. The panel was perfectly flat before polising

Okay, so with the pic.s we are left with fisheye (contamination) or solvent pop (improper drying). My vote is fisheye. The reason you don't see them before cutting with your 2000 is that they are kind of part of your orange peel. When you start cutting down the peel you are leveling all the orange peel effects leaving only these craters. And yes, they will look worse as you continue your cut/buff process. What to do? You have to try and identify WHERE you are getting contamination from.... things that cause this....poor prep., outside sources of contamination from the air itself, and contamination coming from your air lines, to name a few. With this much cratering I'd probably be starting over down to bare metal however you should try and figure out WHERE this problem is coming from before you just do it again.... 68 will jump back on here, let's see what he thinks....

Okay before we go much farther a few questions:
Is this Single Stage or BC/CC?

If clear coat applied:
What brand?
How many coats?
Flash time between coats?

Explain your wet sanding process.
What grit did you start with?
What other grits did you use before the 2000?
Where there any shiny spots still showing when your were done sanding?

Hi it was a single stage we call it solid colour in the UK, cc not aapplied wet sanding 1000 1500 2000 I spent a couple of months wet sanding all body and panels to a excellent mirror Finnish only when I use compound with mop the problem happens, in the picture the craters look like fish eyes but they aren't bad photo thay are sharp and look like a stone in print, acrylic 2 pack paint was used regards Paul.