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The number of new cars made in the U.K. was down 17.9% in July compared with a year earlier, but scrapping schemes have slowed the pace of decline.

The U.K. produced 107,635 cars in July, according to the Society of Motor Manufacturers and Traders, down from 131,079 cars in July 2008. However, the pace of decline was the slowest since September last year, when production was still growing.

"The slowdown in the rate of decline of U.K. car production reflects the impact of the scrappage incentive schemes in place across Europe," said Paul Everitt, SMMT chief executive.

The U.K.'s major car producers including the U.K. units of global giants such as Toyota Motor Corp. (TM), General Motors Co, Nissan Motor Co.(7201.TO) and Honda Motor Co. (HMC). They slashed production, mothballed production lines and laid off staff as the industry was hit by the worst downturn since World War II.

However, production has slowly been ramped up again in response to scrapping schemes put in place in several E.U. countries, including the U.K., in recent months. The schemes, which offer consumers incentives for trading-in older cars for new cars that produce lower CO2 emissions, have boosted sales of small cars.

U.K. car production is still down 45.8% on the year over the first seven months of the year. The number produced for export - the U.K. exports about 80% of the cars it produces - are down 44.6% and those for domestic sale are down 49.6%.

Showing the continued impact of the economic downturn on the industry, production of commercial vans was still down 63.8% on the year in the U.K. in July.

-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284; steve.mcgrath@dowjones.com