Page last updated at 18:38 GMT, Friday, 20 March 2009

UK car production in record drop

Rolling 12-month UK car production

The number of new cars produced in the UK fell by a record 59% in February, year-on-year, as the motor industry continues to suffer from weak demand.

Many major manufacturers have been forced to suspend or cut production in the face of falling sales.

The size of the drop has led to renewed calls for more government help.

However a row over protectionism has broken out after Renault's decision to move production back to France from Slovenia, prompted by government aid.

'Weak demand'

The Society of Motor Manufacturers and Traders (SMMT) said just 59,777 cars were made in the UK last month.

"We are in a battle for survival now," said SMMT chief executive Paul Everitt. "The level of demand is something that is a major, major problem."

Mandelson on future of UK car industry

The 59% fall was the largest drop in a single month according to SMMT records which date back to 1970, and the fifth straight month of decline.

The drastic fall in production, along with reports that a plan to rescue Birmingham van maker LDV had collapsed, prompted renewed calls for government help for the industry.

"The Government and the banks, most of whom have had a helping hand from the taxpayer themselves, must strain every fibre to secure this plant's future, to keep the lights on in this [LDV]factory and these skilled workers in employment," said Unite union leader Tony Woodley.

Incentive scheme

The SMMT has been lobbying the government for help for their finance divisions that provide loans to buy cars. It also renewed calls for a scheme to encourage motorists to replace old cars with new ones.

A similar scheme in Germany increased car sales by 22% last month, but so far the UK government has only said it was "looking into" the possibility.

Speaking to the BBC on Friday, Business Secretary Lord Mandelson said there would be no blank cheque for the industry but they had been "encouraging" car manufacturers to apply for European loans.

"We are not just throwing out money willy-nilly, we are not a bail-out fund in the government," he said.

"We have go to ensure that where we can make a difference at the margin we are there."

In January, Lord Mandelson announced a package of government support for the car industry - including a scheme to unlock £1.3bn of European loans - and a government pledge to guarantee up to £1bn of further loans to fund investments in environmentally-friendly vehicles.

Question marks

However, the benefits of government assistance to the car industry are being questioned after French aid prompted Renault to announce that it is switching production of its Clio Campus model back to France from a factory in Slovenia.

The French car company stressed the move - which will create 400 jobs at its plant near Paris -would not lead to any job losses in Slovenia.

EU Competition Commissioner Neelie Kroes told the BBC she was highly surprised by Renault's move, which a French minister described as "repatriation of production", and was seeking urgent clarifications.

Ms Kroes told the BBC that she was highly surprised by the French minister's comments and that any link between the aid and relocating industry would be illegal.

It comes as EU and world leaders are trying to unite ahead of next month's G20 summit in setting out a message that nations must not resort to protectionism as a means to economic recovery.

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