The Society of Motor Manufacturers and Traders (SMMT) said 859,575 cars were made in Britain in 2021, 6.7% fewer than in 2020 - when COVID also hit production - and a third less than in 2019 when over 1.3 million cars rolled off production lines.
"2021 was another incredibly difficult year for UK car manufacturing - one of the worst since the Second World War," SMMT chief executive Mike Hawes said.
Britain's economy as a whole has largely recovered from the losses caused by COVID-19 - with economic output in November back at pre-pandemic levels - but car production in December was 12.7% lower than a year earlier.
The global shortage of semiconductors was the biggest reason for weak production, the SMMT said. Staff absence due to COVID and the closure of car showrooms during lockdowns in early 2021 also played a role, as did the closure in July of Honda's car plant in Swindon in southern England.
Honda - which before the pandemic accounted for about 10% of British car production - said the closure reflected low sales across Europe and was not due to Brexit.
More than 80% of British car production is exported, most of it to the European Union, and new trade barriers have been a major concern for other manufacturers who rely on the swift cross-border delivery of components and finished vehicles.
Hawes said confidence in Britain's auto industry rose after the agreement of a trade deal with the EU at the end of 2020, and that the 4.9 billion pounds ($6.6 billion) of potential investment announced last year was the highest since 2013.
Much of the investment will support production of electric vehicles, which accounted for a record 26% of vehicles made in Britain last year.
Jaguar Land Rover was Britain's biggest car maker in 2021, with 220,554 units, followed by Nissan with 204,522 and BMW's Mini with 186,762 vehicles.
($1 = 0.7399 pounds)
(Reporting by David Milliken; Editing by Catherine Evans)
By David Milliken