Over one million cars have been built so far in 2016, with July marking the 12th consecutive month of growth for the sector, according to the SMMT.

The UK’s vehicle production output rose by 7.6% to 126,566 in July to take the seven-month tally to 1,023,723 – the best level of production since 2000.

It is the first time that UK Car manufacturing has breached the one million mark in July since 2004.

SMMT chief executive Mike Hawes said: “UK car production in 2016 is booming, with new British-built models in demand across the world.

“Manufacturers have invested billions to develop exciting new models and produce them competitively here in the UK.

“Future success will depend on continued new car demand and attracting the next wave of investment so Britain must demonstrate it remains competitive and open for business.”

Demand in July was up both at home and abroad, according to the SMMT, with a 14.1% increase in output for the domestic market and exports up 6% to 101,184 units.

More than three quarters of a million cars built this year are destined for overseas markets, a 77.8% share of total production volumes.

Stuart Apperley, director and head of UK Automotive at Lloyds Bank Commercial Banking, said: “We are seeing consumer demand cooling in the UK, Europe and the US, but the industry is much better placed to deal with this than in previous years.

“In the past the sector suffered from being over-stocked, which meant a dip in consumer demand would see production volumes taking a big hit.

“Today manufacturing output is much more closely aligned to demand, and so we wouldn’t expect to see any dramatic falls in production.”

Chris Bosworth, director of strategy at Close Brothers Motor Finance, urged caution following the positive production figures, however. He said:  “The outcome of Brexit is also beginning to affect foreign-based manufacturers, with announcements that many are reducing staffing hours, as a result of the fall in the pound from Brexit.

“This gives UK exporters a boost. However, profits of these firms are likely to fall unless they increase prices of new vehicles – which will again reduce demand-side pressures on UK car manufacturers”.