Car industry pleads for fiscal aid

Next month's Budget must feature measures to rescue the ailing car industry before it reaches a state of emergency, ministers have been warned.

Chancellor Alistair Darling received a letter from the Society of Motor Manufacturers and Traders calling for aid to try to reduce job losses and cuts in production.

The trade body urged the Government to introduce a so-called scrappage scheme, similar to a scheme that has enjoyed huge success in Germany. The initiative, which boosted car sales by a fifth in the European heavyweight, involves encouraging motorists to trade in older cars for new models through cash incentives.

Chief executive Paul Everitt said: "Government has an opportunity to support UK manufacturing as a key global player in the low carbon future but immediate action is needed to protect the country's industrial capability.

"Government must use the Budget to boost consumer confidence and kick start the market with a scrappage incentive scheme to encourage private sales and tax changes to generate business sales."

Demand for new cars has fallen by between 20% and 30% in recent months and the number of vehicles built in the UK this year is expected to be cut by 700,000 compared with 2008.

A loan guarantee schemes worth £2.3 billion was announced by business secretary Lord Mandelson in January aimed at helping the motor industry cope with the downturn, but the money has not yet fed through to companies.

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