German car manufacturer BMW AG is cutting around 850 jobs at its Mini plant in Oxford, central England, as it scales back production in the wake of falling demand.

The company, which produced 235,000 cars at the plant last year - its only Mini factory worldwide -said in a statement it would now be operating five days a week instead of seven.

"While Mini has been weathering the economic downturn, it is not immune from the challenges of the current situation," the company said in a statement yesterday.

A spokesman said sales of the Mini, made famous in the 1969 Michael Caine movie The Italian Job, had slumped 34.5 per cent in January to just over 10,100 worldwide.

The production cut follows a severe downturn in car sales which has hurt manufacturers across the globe. In the UK, major car makers including Nissan, Ford, Jaguar Land Rover and Aston Martin have announced over 3,000 job cuts in recent months..

Britain said last month it would guarantee up to £2.3 billion of loans to help keep the car industry afloat, a deal welcomed cautiously by industry bodies but criticised by trade unions for not going far enough.

Britain's car industry is largely foreign owned, but still employs more an 800,000 workers.