CAR production in Britain is a doomed industry, according to a report.

The study, by consultants AT Kearney, predicts a continued decline in high volume production, increasing plant closures and continued pressure on parts suppliers.

The report, The Future of the UK Automotive Industry, states: "Volume car production does not have a future in the UK."

It estimates that the car manufacturers remaining in the UK will have to source even more of their parts from Europe, using the euro currency, in order to remain competitive.

Low-cost economies, such as Poland and Hungary, will benefit from the suppliers' "flight to the Euro zone".

The report states: "The remaining UK suppliers will increasingly focus on the premium sector and luxury cars. They will have to achieve the quality and technology levels that are a prerequisite of serving such customers."

The report is published at a time when the latest data reveals that car production in April fell by 10.3 per cent, to 498,000 vehicles.

Production for export, usually two-thirds of the output of UK-based car manufacturers, fell by more than a quarter (26.3 per cent).

AT Kearney blames Britain's indecision on whether to join the euro as the reason for the decline, and the move from the UK to continental Europe.

Britain's biggest car manufacturers Nissan, Toyota and Honda, have already announced plans to source more parts from Europe. That was the price paid by Nissan's Sunderland plant for retaining production.

Nissan, which is partly owned by Renault, decided to build the replacement for the Micra at Sunderland, over Renault's plant at Flins, France.

Nissan Motor Manufacturing (UK) chief executive John Cushnaghan, believes the Sunderland plant will attain its target of building 500,000 cars a year.

The plant is undergoing a £225m upgrade and expansion programme for the Micra project, and Mr Cushnaghan has committed it to finding a 30 per cent reduction in costs.

That has implications for the 130-plus UK suppliers among its 226 suppliers in Europe. About 65 per cent of parts will eventually be sourced in Europe, according to Mr Cushnaghan.

Nissan spends about £1.5bn on parts with UK suppliers, so the potential loss of business will be a heavy burden.

Garel Rhys, professor of motor industry economics, said the components sector was bound to experience some loss of business, but added: "The whole trend of the European motor industry is to assemble cars in local markets, using components sourced from all over Europe."

The AT Kearney report concludes: "Each link in the industry chain, as well as the UK Government, must take action now to ensure a vibrant future for the UK auto industry."