UK engine manufacturing was down 10.8% in 2021 to just over 1.6m units.
Production for domestic (692,616) and overseas markets (949,265) fell 3.6% and 15.4%, respectively.
December output tumbled by over a quarter (139,204) to round off another tough year for the sector.
Mike Hawes, SMMT chief executive, said: “2021 represented another challenging year for UK engine manufacturers with the effects of the Covid-19 pandemic continuing to disrupt output.
“The global shortage of semiconductors, in particular, hit car and van production and in turn demand for engines.
“There is hope that the sector can recover in 2022 as vehicle volume rises again, however, action is needed to combat rising energy costs, supply chain shortages, while long-term we must continue to upskill our manufacturing workforce to produce electrified powertrains.”