Car scrappage scheme extended

The Government's car scrappage scheme is being extended for up to a month, it has been announced.

Business Secretary Lord Mandelson said the scheme, which had been due to end this month, would now continue to the end of March or until the remaining funds ran out, whichever was sooner.

Last night's announcement came ahead of the latest new car sales figures out today, which are expected to show the upwards trend of recent months continuing.

The scrappage initiative offers a £2,000 grant to motorists trading in vehicles over 10 years old for new models, and was introduced last May to help revive flagging car sales.

A total of £400 million has been set aside by the Government for the scheme, with a limit of 400,000 vehicles that can be scrapped.

Some 330,000 new cars have been ordered under the programme, which means 70,000 people can still take advantage of the deal.

Lord Mandelson said of the extension: "Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most."

Analysts believe the car sale figures for February will show a slight improvement on the 111,000 sales of new cars last month.

January is not usually a busy month for car sales and motorists may be holding out until the new registration plate in March.

Annual sales of new cars in the UK fell just short of two million last year, and the Society of Motor Manufacturers and Traders expects another "extremely difficult" year in 2010 for the industry, forecasting sales of around 1.8 million.

SMMT chief executive Paul Everitt has described consumer confidence as "fragile" and has urged banks to be more willing to lend money to motor firms as they battle to recover from the recession.

Many experts believe there will only be a radical improvement in new car sales if there is an upturn in the economy.

Some car makers are expected to show a healthy growth in sales, especially those selling to countries such as China, but the commercial vehicle market could still struggle, as businesses postpone fleet replenishment.