The EEF and SMMT are urging the government to rethink ending the car scrappage scheme.

EEF, which provides engineering and manufacturing support and employment advice for business, is lobbying the government to extend its car scrappage scheme, or risk the livelihoods of those employees in the industry.

In a letter to Chancellor Alistair Darling, the EEF argues that the scheme has been triumphant in stemming the decline of the car industry and has helped retain a significant number of skilled employees.

Car scrappage schemes have been widely successful across Europe, and the US “cash for clunkers” scheme ran out of money within a matter of months, as consumers cashed in on the available budget.

The EEF says that without government incentives it is far from certain that consumer demand for motor vehicles can be sustained. This, together with the expected deterioration of the Aerospace and Defence industry in 2010, could result in a serious downturn in the manufacturing industry.

EEF Director of Policy, Steve Radley commented: “The success of the scrappage scheme has been clear for all to see and has put a floor under manufacturing recession and helped retain skilled employees.

“Failure to extend the scheme before a stronger recovery is in place runs the risk of pulling the rug from under the automotive sector, damaging key supply chains and prospects for a better balanced economy in the upturn.”

The latest report from the Society of Motor Manufacturers and Traders (SMMT), declared that car production fell 31.5% in August compared to the same month in 2008.

It also called for the UK’s car scrappage scheme to be extended. Paul Everitt, SMMT Chief Executive, said: “The scrappage incentive scheme has had a positive impact on car production with one in three cars build in the UK last month for the home market and total volumes starting to stabilise.”