Francis Mensah was approaching his fifteenth year as a clerk at Lehman Brothers when the investment bank collapsed on September 12. Yesterday he stood at the Jobcentre in Hoxton Street, Central London, wondering how he was going to pay his mortgage.

“It is hard, it is really hard,” Mr Mensah said. “I'm looking for a job because I cannot survive on benefits with my family.”

With a son about to go to university, Mr Mensah was not particular about his future employment. “The only way you can get a job at the moment,” he explained, “is to say you will do anything.”

Meanwhile, 100 miles away in Norfolk, Melvin Stratton, 54, a builder who lost his job in June, is now living on £60.50 a week jobseeker's allowance and is no closer to finding work. “I never imagined the situation would get so crazy,” he said.

Mr Stratton's son, Darren, has also lost his job in the building trade.

“My son's bored and depressed,” he said. “I try to stay positive but I've never been sacked in my whole career.”

Just as on every weekday for the past 32 years, on Monday Steve Brockbank arrived early to work at the LSUK garage in Chelmsford, Essex. This time there was a short note informing the assistant manager that he and his ten staff had been made redundant. “We knew the company had been sold but we didn't think our jobs were at risk,” said Mr Brockbank, one of 680 workers made redundant when the Sheffield-based car parts company closed last week. “My son and my partner worked with me and now we're all out of a job,” he said.

LSUK's demise sparked a reaction across the automotive industry. From Aberdeen to London, manufacturers, suppliers and car dealerships were all feeling the heat of restricted credit and low consumer confidence. As Mr Brockbank explained: “It's a chain reaction. We went under because our accounts got cut by £200,000. People didn't want spare parts any more. One of our biggest clients was the AA. When they had fewer people breaking down they cancelled our contract.”

With orders down by 30 per cent, LSUK went into administration. The knock-on effects to its clients were severe. “Some of my customers were ringing me up expecting parts that we couldn't give them,” Mr Brockbank said. “Garages that we supplied suddenly didn't have a supplier.”

Over the past three months demand for new cars has fallen by 20 per cent, causing a ripple effect down the supply chain.

“April is when we started to notice that sales were certainly tailing off a little bit,” said Diana Mackinnon, general manager of the Lexus Edgware Road dealership in northwest London. “The bigger engine products got hit the hardest. The credit crunch is at the forefront of our discussion all the time.”

Ms Mackinnon has not yet had to make any staff redundant but Pendragon, Britain's biggest dealer group, which has cut 500 jobs this year, predicted this week that conditions “will continue to be difficult throughout 2009”.

Customers have sometimes been left in the lurch. Paul Povey, 51, transferred £5,000 to a Bristol Skoda dealership before it closed suddenly this week with the loss of 18 jobs. “I was told that my new Fabia had been transferred to another Skoda dealership,” he said. “But they told me they couldn't release anything until a receiver is appointed. Customer services said they couldn't find my money.”

Mr Povey said he was £5,000 out of pocket with no car. “It's very stressful,” he said. “I just want my money back.”