Demand for British-made cars from domestic consumers roared ahead in July, kindling hopes of a revival in manufacturing.

British-based carmakers produced 28,895 vehicles for the home market in July, an increase of 38% on last year, according to industry group the Society of Motor Manufacturers and Traders (SMMT). This helped lift total UK car production by 7% to 128,870 cars.

The majority of British-made cars are destined for export, but production for foreign markets nudged up just 0.6%, as ongoing uncertainty in the eurozone, the UK's largest car export market, continued to weigh on sales.

The increase in cars rolling out of factories is being viewed as another sign that the UK's economic recovery is picking up speed. On Wednesday, the Confederation of British Industry said that manufacturers' order books were at their fullest for two years.

"Car manufacturing is continuing to follow the wider UK trend for more positive economic growth with a 7% rise in July," said Mike Baunton at the SMMT. "We are starting to see slight signs of recovery from Europe which will support stronger production levels this year." 

Earlier this week Nissan filed an application to extend its factory in Sunderland, already Britain's largest car-making plant, where it makes the Qashqai, Juke and electric Leaf. Jaguar Land Rover is doubling the size of its West Midlands engine plant as it seeks to capitalise on surging demand across Asia for its vehicles.

Rachel Pettigrew, senior economist at the manufacturers' association EEF, said the manufacturing sector was on course for growth of 1.9% in 2014. "There is a lot of divergence and variation in the manufacturing sector. Automotive has been one of the strongest performers coming out of the recession and since the start of the year we have really seen a pickup in domestic demand."