The major survivor of the UK's bus-building industry is calling on the government to introduce a "bus scrappage" scheme to kick-start industry investment that has been stalled by the rail franchise crisis.

The major survivor of the UK's bus-building industry is calling on the government to introduce a "bus scrappage" scheme to kick-start industry investment that has been stalled by the rail franchise crisis.

Alexander Dennis (ADL), owned by a Scottish business consortium and employing half of its 2000 worldwide staff at its Falkirk headquarters, is also calling for a subsidy for its hybrid double-decker bus, now on trial in London, which cuts fuel consumption by 40%, but is a third more expensive to buy.

Colin Robertson, the group's chief executive, said the government was not doing enough to help a UK manufacturing sector which supports over 4000 jobs. He added: "If a scrappage scheme is good enough for the car industry, why not for one of the last bastions of the automotive sector in Britain?"

A subsidy equivalent to the typical 20% on a new £10,000 car would mean £25,000 towards a new bus. "That would help people make a lot of decisions quickly," he says.

Alexander Dennis, whose backers include Rangers chairman Sir David Murray , financier Sir Angus Grossart and Stagecoach boss Brian Souter, lifted sales by 25% to over £300m last year, but saw pre-tax profit halved to £3.2m, according to annual accounts published yesterday.

It described margins as "disappointing", adding: "Competition remained fierce and we were unable to fully recover additional costs from higher commodity prices and a stronger euro we are attempting to restore more acceptable margins to the business."

The business consortium bought the company out of administration in a £90m deal four years ago in a bold bid to rescue the UK sector. The group has laid off 200 workers this year, half of them at Falkirk, and says although it has a "reasonable" order book it is cautious about the outlook for the rest of 2009.

"Whilst the bus operations of many of our main customers perform well during this recession, they are reviewing their short-term capital expenditure plans," the directors said.

Bill Simpson, corporate affairs director at Alexander Dennis, commented: "The whole industry should be doing better. Unfortunately all of the big five bus operators are caught in a dilemma, as they have got rail franchise issues. They are sitting tight on decisions, there is a bit of hesitancy."

Alexander Dennis is the UK's leading supplier of low floor, easy access vehicles and pioneers hybrid energy vehicle technology. It supplies 70% of London buses and forms the backbone of the fleet in Hong Kong, Vancouver, New York and Las Vegas. On the green buses trial in London, Robertson says that if the government is serious about its energy policy it will "fill that gap" between the cost of conventional and hybrid vehicles.