The car industry is “reaching a state of emergency” and needs government action in the Budget otherwise the supply chain and the country’s industrial capability will be irreparably damaged, the Society of Motor Manufacturers and Traders warned today.

The industry group is stepping up the pressure for access to consumer finance and a scrappage programme to encourage people to scrap old cars and buy new ones. It also wants wage subsidies for employees on short-time working.

In a letter to Alistair Darling, the Chancellor, the SMMT also called for a series of other measures in the April 22nd Budget.

Paul Everitt, chief executive of the group, said: “The UK motor industry is reaching a state of emergency and the rate of government action is crucial to the future success of the sector.”

He added: “Government has an opportunity to support UK manufacturing as a key global player in the low carbon future but immediate action is needed to protect the country’s industrial capability.”

The SMMT also wants changes to vehicle excise duty; an increase in capital allowances to encourage more investment in factories making cars and vans; and other changes to tax and emissions regulations governing the automotive industry.

The car industry has been lobbying for help for several months since car markets around the world suffered sharp falls because of the global slowdown. In January, the Government offered £2.3 billion in loans both from the UK and the European Investment Bank but it has not delivered on the other two key demands from the industry for consumer credit and a scrappage scheme.

Two weeks ago, Lord Mandelson, the Business Secretary, rounded on the Bank of England for not moving quickly enough. But the Bank was quick to hit back saying that it wasn’t its role to lend money to specific industry sectors.

SMMT sources complain that there seems to be no overall responsibility for the help it is seeking and that the Treasury fears it cannot instruct the Bank to make resources available because it is an independent organisation.

The car industry has been backed by the CBI in its call for a scrappage incentive programme. The employers’ organisation has said that there should be scrappage incentives for all vehicles and also consumer appliances.

The introduction of a scrappage scheme in Germany led to a 21 per cent leap in sales last month while sales remained depressed in other markets. Yesterday the Netherlands became the latest European country to introduce a scrappage programme, meaning that most countries now operate an incentive to get rid of old cars and buy new ones. Lord Mandelson has said he is considering whether Britain can introduce a programme.

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