Manufacturers enjoyed their best year in a decade in 2007, but the threat of a U.S. recession and financial market turmoil is clouding the outlook for 2008, according to the Engineering Employers' Federation.

A compilation of the EEF's quarterly surveys and other research showed companies benefited from the best business conditions in ten years with rising levels of output and expanding job levels last year.

Investment intentions in 2007 were their strongest since 1997.

Profitability also improved dramatically, with a balance of +34 percent of firms reporting an improvement in profit rather than a fall in 2007, compared with a balance of -4 in 2003.

However, the EEF said the outlook for the next 12 months was more uncertain than it has been for some time.

"With fears of a recession in the United States and turbulence in financial markets, the economic backdrop is likely to become less favourable and growth in manufacturing slower," said EEF chief economist Steve Radley.

"However, manufacturing's new resilience will leave it much better placed to cope with whatever the economy throws at it this year."

The EEF reckons the engineering and manufacturing sector will expand by around 1 percent each quarter.