New car sales in the UK are expected to have slumped by about 20 per cent last month amid mounting fears over the car market and its implications for industry, The Times has learnt.

Sales figures from the Society of Motor Manufacturers and Traders (SMMT) for September will be published today and are expected to be a huge disappointment to carmakers who had hoped for a bit of a bounce from the new registration plate that was issued last month. Some of the more expensive brands and vehicles which need a large amount of fuel will have suffered drastic falls.

The SMMT is to press the Government for decisive action to help the industry amid rapidly falling demand. Their call comes after the head of Land Rover and Jaguar last week urged the Government to follow the lead of the US and pump cash into the economy and additionally the car industry for green initiatives.

It is believed that sales fell as far as 25 per cent towards the latter part of the month but then picked up in the last couple of days. Some industry insiders believe that the pickup was down to carmakers buying some of their own stock and preregistering the vehicles to make their sales seem slightly more robust. Preregistering can only provide a short-term flattering effect, however, because the cars then have to be sold as nearly new at reduced prices.

The gloomy British car sales figures follow a downbeat launch of the Paris Motor Show last week during which many of the leading manufacturers said that global markets are in a dire state.

Many British-based carmakers are now on short-time working to reduce their output in line with falling demand.

Car sales are being hit by three main forces: poor consumer confidence because of the credit squeeze; a lack of finance for those people who do want to buy; and higher prices for fuel.

Paul Everitt, chief executive of the SMMT, said that the Government needed to act to restore consumer confidence. Along with a cut in interest rates, he called for action to force the banks to pass on any interest-rate cuts. He also said that energy and fuel suppliers should be pressed to pass on recent cuts in the price of fuel.

Mr Everitt said: “The key issue for us as an industry is that consumer confidence is shattered. The Government needs to address the real economy as well as the financial system and restore consumer confidence and demand in the real economy.”

The car industry also wants a reversal of the plans to levy more vehicle excise duty, warning that increases for bigger cars and the implementation of a so-called showroom levy would deter buyers further.

Fears are growing among manufacturers that a substantial downturn in the UK automotive industry - Britain’s biggest industry - will lead to the collapse of some companies in the supply chain.

British-based carmakers export a large proportion of their output, but overseas they also are facing increasingly difficult markets. The UK car market is being particularly hard hit because of the greater weakness in consumer confidence and the strong part played by housing in the economy.

Mr Everitt said: “It’s important to stress that this is not just a UK issue but from a production point of view we are facing an increasingly challenging set of circumstances.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive