Tomorrow’s Budget may prove to be a “decisive moment” for the country’s beleaguered automotive industry, the Society of Motor Manufacturers and Traders said.

Following months of falling sales, production cutbacks and lay-offs and continuing economic pressure the industry and its 800,000-strong workforce is at a critical point, the organisation said.

Manufacturers want chancellor Alistair Darling to send “strong buy now signals” to kick-start demand for new cars by introducing a UK scrappage incentive scheme similar to the one that has boosted sales by 40 per cent in Germany, the SMMT said yesterday.

The industry is calling for wider tax reviews aimed at increasing sales across the car and commercial vehicle markets. Its shopping list includes:

n Removing or delaying the planned introduction in 2010-11 of a first-year rate of tax on new cars;

n Increasing the annual investment allowance for businesses to £500,000 to boost spending on vehicles;

n Enhancing discounts on commercial vehicles complying with Euro 5 pollution levels;

n Encouraging government departments and agencies to replace their cars.

Used car specialist British Car Auctions (BCA) said Mr Darling should take a balanced approach to supporting the industry.

“Supporting new car sales is vital but it is equally important that the used car sector is helped as well,” BCA communications director Tony Gannon said. “Used cars are a major part of the motor retail sector’s business and, therefore, a major contributor to the UK economy.”

While there were “mixed messages” over the scrappage scheme, the industry expects little movement on fuel tax and road fund licence, Mr Gannon said. “However, if we could get the chancellor’s attention for a few minutes we would argue that some kind of stimulus for the car credit markets is actually more important, so that those that can sensibly afford to finance a new or used car purchase can do just that.”