A study by the Engineering Employers Federation (EEF) found that UK manufacturers are weathering the crisis in financial markets by becoming more innovative than competitors in low cost countries.

EEF chief economist Steve Radley says: "This survey paints a positive picture of how manufacturing companies have adapted to the challenge of the global environment.

"Instead of competing on price alone they are adopting a range of strategies to take advantage of emerging markets. While there are many other challenges on the horizon, manufacturers look well-placed to rise to them."

Tom Lawton of business advisers BDO Stoy Hayward, which helped with the research, adds: "The competition from emerging markets is likely to increase as these new economies move further up the value chain.

"We see an increasing challenge from China and India as they develop the low cost models that we have seen to date and begin to add innovation, research and increasing quality to the mix.

"However, the threat from established economies such as Germany and the US must not be overlooked."