The government has suggested a wide range of sectors will benefit from the extension of the scrappage scheme, including those producing car parts.

It announced funding is to be increased to £400 million so there will be enough cash to subsidise up to 400,000 vehicles.

The Department for Business, Innovation and Skills said individual component makers should be among the firms to reap the rewards.

Business secretary Lord Peter Mandelson said: "The sector has been strongly affected by the recession, but the scrappage scheme has delivered a boost to manufacturers and the supply chain."

However, he added the extension of the programme is a short-term measure, which should not be viewed by the industry as "a blank cheque".

The scheme will now run until February next year or when the cash has gone – whichever comes sooner.

Meanwhile, the Society of Motor Manufacturers and Traders has welcomed the announcement, claiming it will inspire confidence in businesses and consumers.

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