The leader of Britain's biggest business group today urged the Government to extend the car scrappage scheme until the general election to help recovery from recession and boost employment.
Richard Lambert, director general of the CBI, said the so-called 'bangers for cash' programme had been a big success and had helped support manufacturing jobs across the country.
The Government has extended the scheme, under which motorists receive a £2,000 discount for trading in cars over 10 years old, by £100m to £400m.
The cost is shared between the Government and the car industry, and analysts expect the money to run out early in the New Year.
Mr Lambert, speaking ahead of the CBI annual conference on Monday, said: "The scheme cannot go on forever, but the Government should consider extending it until the general election."
Mr Lambert said car manufacturers were concerned that the ending of the scheme, coupled with VAT returning to 17.5% in the New Year, will hit sales just as the industry recovers from the economic downturn.
"The scheme has had a big impact - distributors in particular have had a great few months."
Mr Lambert said there was no doubt the economy was "stabilising", with business groups now predicting that unemployment will not reach three million next year, as previously feared.
Workers had made sacrifices, such as accepting shorter hours or lower pay, said Mr Lambert, but he revealed that employees at one manufacturing firm on short time had asked to be made redundant because they needed the pay-off money they would receive.
The CBI boss said he detected a feeling of "anxiety" among firms that if demand for goods and services did not pick up, they could have to make redundancies next year.