As the effects of the global credit crunch and higher food and energy prices work through the economy, barely a day goes by without a fresh forecast that the UK is headed for recession. Companies report slowing domestic sales and orders. Housebuilders and retailers, in particular, are feeling the pinch. But there is a ray of hope in the gloom. British manufacturers are in strong shape. Though not immune to the coming downturn, reports of the imminent demise of UK industry are much exaggerated.

There is little doubt that high oil prices and weaker domestic demand will hurt manufacturers' profitability. The latest survey by the British Chambers of Commerce is - not unreasonably - pessimistic. Despite the boost of a weaker pound, it draws parallels with the start of the 1990s when credit was in short supply and house sales collapsing. Official figures show factory output fell 0.5 per cent between April and May.