Car production fell last month but the decline was the smallest for a year, it was announced.

The number of cars made in the UK in September 2009 totalled 119,616 - a 16.1% dip on the September 2008 figure, the Society of Motor Manufacturers and Traders (SMMT) said.

This compared with a 31.5% drop in August 2009 and showed how the Government's "cash for bangers" car scrappage scheme was having a positive effect on the motor industry.

Car production for the year so far - at nearly 695,000 units - is down 41.2% compared with the January-September 2008 period.

SMMT chief executive Paul Everitt said: "The rate of decline in new car production slowed to its lowest level in a year with the volume of vehicles being produced for the UK market comparatively high. Demand is clearly being underpinned by the scrappage incentive scheme and the extension to the scheme will ensure that demand continues into 2010."

The news on commercial vehicle (CV) production was less good, with the number of CVs made last month dipping 53% compared with September 2008. CV production for the first nine months of this year is now down 61.6%.

Mr Everitt said: "The UK economy is slowly emerging from recession, but businesses remain reluctant to commit to large capital investments and this is reflected in low demand for commercial vehicles."

The car scrappage scheme was introduced in May with a limit of £300 million being put into the initiative by the Government. The scheme has now been extended, at a cost of £100 million, to include an extra 100,000 vehicles, with vans eight years old - rather than the original 10-year stipulation - now part of the initiative.

The scheme has helped new car sales move back into positive territory, with July seeing the first monthly increase for 15 months. New car sales last month rose by more than 11% and the SMMT has now revised its year-end new car total - once to be predicted to be as low as 1.66 million - to just under 1.93 million.

A Business Department spokesman said: "The figures announced by the SMMT this week reflect that the scrappage scheme is continuing to support the automotive sector. I am pleased that this Government scheme is providing the boost it was designed to deliver. We hope to see the new changes to the scheme, which are now live, continuing to offer positive impacts in the automotive sector and wider manufacturing."