Jaguar will become the latest carmaker to cut production as the UK automotive industry struggles to deal with plummeting demand in Western Europe and the US.

The famous marque, now owned by India’s Tata conglomerate, will scale back output from its Castle Bromwich factory at the end of the month. The cut follows similar action by Toyota, Land Rover and Bentley.

Other car manufacturers are also expected to look at cutting production in response to the sales slide across markets. Premium brands such as Jaguar have been particularly badly hit as motorists hold back from buying amid the credit crunch.

Last month the UK car market suffered its worst August sales for 40 years and export markets are also suffering from weak demand. Sales this month, a key date in the industry’s calendar because of the new registration plate, are also believed to be very poor.

It is thought that the market is being suppressed not only by poor consumer confidence but also by a lack of available finance for car loans. A spokeswoman for Jaguar said: “In view of the current sales environment we will be taking action to balance production with demand in the fourth quarter.”

She added that the carmaker was still deciding on the scale of the action but it is thought likely that it will cut at least one shift. Jaguar’s Castle Bromwich factory employs 2,600 people to make the XJ, XK and the new XF.

The availability of finance for car purchases is difficult to gauge but it is believed that at least one big lender has halved the amount of money it is offering. The Retail Motor Industry Federation (RMIF) has given a warning that there is now virtually no sub-prime car finance.

Sue Robinson, director of the RMIF’s national franchised dealers association said: “Car finance is still available, but the criteria is stricter, and has already been for a number of weeks. Consumers are being asked for a larger deposit than was previously the case. On the sub-prime side, there are now hardly any providers for sub-prime car finance.”

The car industry is Britain’s biggest and a contraction in output will worry suppliers, many of which are smaller businesses. It will also hit the steel industry. British carmakers have begun cutting their production only in the past few weeks as sales here and overseas have progressively weakened, but no permanent jobs have been lost so far. Most companies have built flexibility into their working patterns so that time can be banked.

This means that workers who are stood down during lean periods will have to work longer in busy times. Many companies use some agency staff so that they can be added or shed according to need. Toyota and Bentley are cutting agency positions at their plants near Derby and Crewe.

In the slow lane
Falls in UK car sales in August compared with a year ago

41% Fall in Jaguar sales

58% Fall in Land Rover sales

26% Fall in Toyota sales

Source: Society of Motor Manufacturers and Traders

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