The car industry is facing a national emergency, the Government has been warned, amid increasing pressure for a state bailout. Ministers have been told that immediate action is needed as companies run out of cash and stall production.

Toyota, one of Britain's most successful car manufacturers, told workers yesterday that its factory near Derby would close for two weeks early next year. Most car companies are on extended Christmas breaks and more closures are looming in the new year. Honda is preparing to close for two months to cut production. Other companies are believed to be about to announce further closures.

Some suppliers, such as Wagon, have already gone into administration because demand has dried up.

It is believed that government aid is being held up by the Treasury, which is fearful of creating a precedent and encouraging demands from other industries. Alistair Darling, the Chancellor, is said to prefer individual negotiations with companies to help to secure lines of credit. But the manufacturers and unions believe that the entire industry needs support.

The Society of Motor Manufacturers and Traders (SMMT) has said that unless the industry receives help there will be repercussions for other large industries because carmakers are big customers for steel, chemicals and plastics. Corus, the Anglo-Dutch steelmaker, has already announced that it is cutting production by 30 per cent.

Paul Everitt, the chief executive of the SMMT, said: “This is a national emergency, certainly for manufacturing and also for the economy more generally.”

An announcement on support for the motor industry had been expected this week, but talks between company chiefs, unions and ministers are still going on.

Jaguar Land Rover and Vauxhall are thought to be pressing the hardest for individual assistance. Jaguar Land Rover, which is owned by the Indian conglomerate Tata, is seeking access to £1billion over two years. Vauxhall is owned by General Motors, which may be close to getting a bailout in the US. But some in the industry fear that the American money for GM may be ring-fenced and not be available to support a European business. GM's European operations began lobbying for assistance on their own behalf last month.

Along with access to credit that will run into billions of pounds, the industry also wants the Government to help to fund training for workers while they are laid off. Companies are desperately trying to reduce labour costs without losing experienced staff. Last week Vauxhall offered workers a nine-month sabbatical on 30 per cent pay.

Unions have called for a package of £13billion to help all parts of the industry, from the big manufacturers to the small suppliers. Tony Woodley, the joint general secretary of Unite, said: “There is no doubt that the situation is very serious and that ministers need to act immediately. There is no possibility of hanging around here.”

The call comes as other European countries have announced aid packages for their car industries. Mr Everitt said that Britain must follow the actions of France, Spain, Sweden and other countries. A US deal could come this week.

The dire state of the European market was emphasised yesterday by figures showing that new car sales across Europe fell 25 per cent in November. Sales in Spain fell 49.6 per cent, Italy was down 29.5 per cent and Germany 17.7 per cent. In Britain sales fell by 36 per cent. The SMMT expects car sales in Britain to fall to 1.8million next year — a 25 per cent reduction from last year. This year sales are expected to be 2.1million, after a strong start to the year was reversed rapidly in the past few months.

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