Jaguar will cut back production from its Castle Bromwich factory in the UKat the end of the month as potential buyers are withholding purchases due to the liquidity crunch, which has led to car finance virtually drying up.

Jaguar sales fell 41 per cent in August compared to the same period last year, and Land Rover lost 51 per cent, in comparison to Japanese carmaker Toyota's loss of 26 per cent in UK car sales.

This decline in Jaguar and Land Rover sales has led to the management decision to cut production by at least one shift at the Castle Bromwich factory, which builds the Jaguar X series and Land Rover Freelander, and employs more than 2,000 permanent staff.

Earlier in August, Land Rover had cut production and brought in a four-day week at its Solihull plant.

The company says it is slowing production so that it does not have to stockpile an expensive inventory of unsold vehicles.

Toyota, Land Rover and Bentley have also cut production in view of the slump in demand with August sales being the slowest in the UK since the last 40 years and the Society of Motor Manufacturers and Traders said UK car registrations in the current month had been dismissal.

Luxury car sales have slumped in key markets like the US, the UK and Germany, but have risen in Russia and China.

With car finance drying up, those few who are still financing cars, have made the availability criteria more stringent and now demand a larger deposit from customers. The Retail Motor Industry Federation (RMIF) has warned that there is now virtually no sub-prime car finance.

As of now, British carmakers have not cut permanent jobs but agency-hired staff who could be hired and laid off as per the requirement at the factory, could risk widespread lay-offs.

Jaguar Land Rover had laid off some agency staff earlier at the Halewood plant and more could be asked to leave as the company attempts to cope with its dismal sales. Toyota and Bentley are also in the process of pruning agency staff at their plants near Derby and Crewe.

Most companies have engaged flexibility into their employee working schedules. Employees who are temporarily asked to stay at home during lean periods will have to put in extra hours during busy times.

Any cut in production will hit suppliers to the automobile industry many of them who are small businessmen, the steel industry will also not be spared. (See: Tata Motors becomes new owner of Jaguar, Land Rover)