Car sales fell to their lowest level for more than 40 years last month in the most dramatic sign yet that the country is heading into a recession.

Britain’s biggest industry gave warning of deeper cuts in production to come as consumers, worried about the high cost of fuel and the economic downturn, shy away from big purchases and abandon the showrooms.

Traders reported just 63,225 new cars sold, the worst August figures since 1966, sending a chill through the automotive industry from manufacturers to the secondhand market.

Premium brands, many of which are made in Britain, were among the hardest hit, with Aston Martin suffering a 67 per cent drop to just 19 cars sold. Land Rover saw a 58 per cent fall to 422 cars and Jaguar a 41 per cent slump to 422 cars.

There was further bad news as property prices were shown to have fallen sharply – with more than £25,400 wiped off the value of an average home in the past 12 months. New figures from Halifax revealed the fastest rate of decline since the lender started its house price index in 1983.

Consumers were offered no respite by the Bank of England, however, as interest rates were kept on hold. Despite official confirmation that growth has slowed to a stop, rates were kept at 5 per cent.

The latest slew of bad news came as Gordon Brown struggled to maintain a political fightback that is becoming mired in internal discord. The Prime Minister insisted that he was “cautiously optimisitic” about the economy in what his opponents portrayed as a rebuff to Alistair Darling’s weekend claim that Britain was facing its worst economic conditions for 60 years.

In a speech to the CBI in Glasgow, Mr Brown pledged more help for low and middle-income families. While people understood that no government could on its own “put everything right that is creating hardship”, he said that they did look to ministers to help them through difficult times.

“We will not let them down,” Mr Brown said. “We will do what it takes to bring security to families on modest and middle incomes. And we will ensure that no one who is prepared to work hard and adapt to change will lose out as a result of global forces.”

But measures to help with rising energy bills were in disarray last night after Downing Street admitted that proposals to raise £500 million to fund fuel vouchers were in tatters.

George Osborne, the Shadow Chancellor, said Mr Brown was in denial over the severity of the downturn. “At a time when Britain needs strong and united leadership with a clear sense of direction, we have a Labour government descending into civil war and a Chancellor and a Prime Minister who publicly disagree on the severity of the problems we face,” he said.

The slump in car sales prompted the heads of the main car industry groups to call for urgent government and economic action to restore confidence.

The Society of Motor Manufacturers and Traders wants Mr Brown to set out an emergency economic plan. Paul Everitt, the chief executive, said it was “concerned by the reluctance of boost the economy and restore confidence.” Sue Robinson, the director of the Retail Motor Industry, said: “Continuing economic pressure on households has made consumers wary of making big purchases, so by deciding against an interest rate reduction, the Bank of England has missed an opportunity to kick-start the economy.”

Britain’s automotive industry, which employs 815,000, sells overseas predominantly but faces terrible markets in Europe and the United States as well. Industry experts described the sales figures as dreadful and gave warning that they would impact on carmaking in Britain. Already Toyota and Land Rover have announced production cutbacks because of falls in orders.

Brent Dewar, head of marketing for General Motors in Europe, told The Times that the “headwinds in the UK market are concerning to us”. He said that consumer confidence in the UK and Ireland was a “burgeoning issue” for GM, the world’s biggest carmaker, which operates Vauxhall’s factory at Ellesmere Port, Merseyside.

Garel Rhys, a car industry economist at Cardiff University, said that the figures were “truly dreadful” and forecast that the British market would probably not recover until the second half of 2010.

Ten years ago, August was a strong month for car sales as the new registration plate was issued. This was changed in 1999, however, to two plates issued in March and September.

Roy Kishor, automotive partner at Kroll, the restructuring and advisory consultancy, said that the car industry was facing a perfect storm of “depressed sales, depressed residual values, cheap offers and margin pressure”. He added that some mainstream used car prices had fallen 10 per cent in two months.

The British Car Auctions (BCA) Used Car Market Report found that car volumes and values fell last year even before the most recent plunge in consumer confidence. Sales of used cars dropped by 5 per cent, to seven million, with both dealers and private owners affected.

Estimates for the first half of this year suggest that the average value of a used car bought at auction has fallen by more than £1,000, to £4,765.

Tim Naylor, spokesman for BCA, said: “You do tend to find that, when sales of new cars are down, then there is a smaller supply of cars of a certain age in the used car market. Buyers of used cars could just be deferring their purchase in the short term or could be putting it off indefinitely.”

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