Car production gets short-term boost

Britain's car manufacturers increased production in December more dramatically than at any time for 34 years, data revealed yesterday, but the industry's total output in 2009 was still down by almost a third on 2008.

The automotive industry made just over 85,000 cars last month, a 58.5 per cent increase on December 2008 and the largest such rise since 1976, the Society of Motor Manufacturers and Traders (SMMT) said.

The rise suggests car-makers have begun to benefit from the economic recovery analysts believe started in the final quarter of last year, as well as from rising demand in countries to which British manufacturers export.

The scale of the increase may also be linked to rising demand from Britons aware that the UK's £300m scrappage incentive scheme is drawing to a close. Under the scheme, motorists trading in older vehicles for new models get a £2,000 of discounts on their purchase, but the Government has recently begun rationing the amount of money available for scrappage, and there is now only £100m left in the kitty. Despite last month's more encouraging results, however, the total production figures for 2009 paint a stark picture of the motor industry's woes.

Total car production was down by 31 per cent over the year as a whole, while production of commercial vehicles was down by 55 per cent.

Makers are also concerned about the outlook for the year ahead, when scrappage comes to an end. While Britain's economy seems to be on the road to recovery, pressures on consumer spending from tax increases, wage restraint and interest rate rises are likely to reduce demand.

Paul Everitt, chief executive of the SMMT, said: "Car and commercial vehicle production remain well below pre-recession levels and it is essential that there continues to be a focus on creating more and better-priced finance for business and consumers."