The government has announced a series of packages and loans worth £2.5bn to support the UK car industry.

Business secretary Lord Mandelson announced the deal yesterday, ahead of a meeting with several leading car manufacturers.

The package is designed to unlock bank lending to the industry by offering guarantees based around £1bn worth of guarantees from the UK and around £1.3bn from the European Investment Bank.

This is the first time that a UK industry that is not in the financial sector has received government aid in the current financial crisis, but Mandelson insisted that it does not set a dangerous precedent.

"There is no blank cheque on offer, no operating subsidies. This industry is not a lame duck and I am not proposing a bail-out," said the business secretary.

The measures have been criticised by some in the car industry as not going far enough to help the ailing sector.

The union Unite called the measures a "massive disappointment" and added that it left, "the spectre of redundancy still hovering over thousands of skilled workers."