The number of new cars made in the UK declined 43% in May compared to the same period last year, according to figures released by the Society of Motor Manufacturers and Traders (SMMT).

Several car companies have cut production, made staff redundant or asked asked them to take time off as the economic downturn has seriously affected the demand for new cars.

"Prompt action by manufacturers to realign supply with demand has been painful, but was necessary. There is now a direct link between demand in the marketplace and production volumes," said Paul Everitt, SMMT chief executive.

There are hopes in the car industry that the government's scrappage scheme, which has already taken 60,000 orders for new cars, will provide a boost to the ailing industry. The scheme provides a £2,000 discount on a new car - provided equally by the government and the manufacturer - if a car that is at least 10 years old is exchanged to be scrapped.