Britain’s car scrappage scheme helped to stem the fall in vehicle production last month, according to figures released today.

Output fell by 43 per cent, compared with May last year, but is below the 55 per cent annual decline recorded in April.

The scrappage scheme, which was announced in April’s Budget, was introduced last month and gives motorists £2,000 towards a new vehicle in exchange for a car that has been on the road for ten years or more.

Since its introduction, 60,000 cars have been sold under the scheme, according to the Department for Business, Enterprise and Regulatory Reform.

The Government introduced a scrappage scheme following similar moves in Germany and France, which have succeeded in raising demand for cars despite the recession.

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “The scrappage schemes in place across Europe are now beginning to have a positive impact, although the full benefits will take a little longer to flow down to companies at all levels in the supply chain”.

However, the commercial vehicle sector continues to suffer, with production falling 74 per cent in May.

Mr Everitt said: "Commercial vehicle production is severely affected by low business confidence and economic uncertainty.

"Businesses across the economy are still holding back on new expenditure and will need to see better access to finance and stronger domestic demand."

Dire trading in the commercial vehicles sector was underlined earlier this month when LDV, the white van maker based in Birmingham, fell into administration.

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