By James Arnold BBC News Online business reporter

Cramped, draughty and ancient, Cambridge looks like a peculiar choice for a hi-tech hotbed.

There is a self-sustaining desire right now to be optimistic Brian Moon, Cambridge Consultants

Until not long ago, the lack of sun, palm trees and sparkling skyscrapers was seen as a sign that Europe's biggest concentration of technology businesses could not last.

In fact, the peculiarities of Cambridge's "Silicon Fen" may have enabled it to ride out the global tech slump.

Even - possibly - to thrive.

Tricky, not tragic

The past couple of years have been rough on Cambridge, but not excessively so.

Dr Moon scents an upturn in the air

"2002 was a very difficult year," says Brian Moon, chief executive of Cambridge Consultants, a technology development firm that was in at the birth of Silicon Fen in the early 1960s.

"Our pipeline of leads and opportunities was not diminishing, but nor was it getting consummated.

"Nothing was getting built, and we took that as an indicator that people were just treading water, waiting for something positive to happen."

Many firms shut down; others, like chip maker ARM Holdings, the region's biggest tech company, saw once-mighty shares tumble.

Reasons to be cheerful

Could the worst be over already? Many in Cambridge think so.

Cambridge was lucky enough not to get involved in all the fluff of the 1990s Hermann Hauser, Amadeus Capital

"Towards the end of last year, we started to see a slight pick-up in sales - and other tech firms started to do the same," says Dr Moon.

"Cambridge is a small place: if people are enthusiastic, it tends to rub off. There is a sort of self-sustaining desire right now to be optimistic."

Indeed, the region seems to have emerged from the crisis more robust than before.

In 2000, Silicon Fen was home to 1,550 hi-tech firms, employing some 44,000 people; now, according to new figures from the Greater Cambridgeshire Partnership (GCP), a regional lobby group, there are 3,500 firms with 55,000 staff.

And despite its reliance on tech firms, the greater Cambridge area has an annual output growth rate of almost 8% - four times the national average.

Critical mass

Some of this can be attributed to the sort of corporate mix Cambridge attracts - fewer once-modish internet or software companies, more research-intensive firms in biosciences, medical technology and the like.

"Cambridge was lucky enough not to get involved in all the fluff of the 1990s," says Hermann Hauser, head of venture capital firm Amadeus Capital and another founding father of Silicon Fen.

This broader corporate base has helped achieve the sort of critical mass needed to anchor the region's economy.

"We have built up a solid undergrowth of serial entrepreneurs - people who have succeeded in the past and prove it can be done," says Dr Hauser.

"Five years ago, we could not point to one Cambridge company that had made a name on the global stage - now there are half a dozen."

Blowing their own trumpet

Silicon Fen has also started to pour more effort into decidedly un-British boosterism.

At the GCP, director Martin Garratt says he has extended his conception of Silicon Fen across at least five counties, from Stansted airport in the south to not far from Peterborough in the north.

More importantly, the university is starting to take serious notice of the possibilities on its doorstep.

"Until a couple of years ago, the university maintained a policy of benign neglect," says Dr Hauser.

The two parties long worked in happily unstructured symbiosis: companies fed off the university's top-class cadre of research scientists, while Silicon Fen provided a steady source of employment and enrichment.

The fact that the university remained airily laisser-faire, allowing staff to wander off into the business world without a qualm, actively helped Silicon Fen develop, Dr Hauser argues.

Many other universities tried to control their academics' business ventures, hoping to grab a slice of the action - in most cases only serving to stifle creativity.

Trying harder

That benign neglect is forming into something more active.

For years, Cambridge colleges have sponsored innovation centres, and the university's corporate liaison office has attempted to manage links between business and academe.

Peter Hiscocks wants to make business respectable

Now, the university is aiming to embed business savvy a litle deeper into the culture of Cambridge - an institution known more for its expertise than its enterprise.

"Five years ago, there was no teaching in entrepreneurship at Cambridge," says Peter Hiscocks, head of the university's Enterpreneurship Centre.

"We want enterprise to be as relevant a career option for Cambridge graduates as, say, the law. And we're making huge progress."

The centre offers some 28 modular business courses to all Cambridge students: its main business basics course has jumped from 120 students when it was launched three years to 620 this year.

Trying too hard

Is it all too good to be true?

Certainly, things could go wrong yet.

In its eagerness to come over all business friendly, the university could blunder.

Last September, keen to secure new sources of finance, it floated a plan to secure control of all intellectual property produced by its academics.

"It's impossible to preserve academic freedom within a rigid framework of intellectual property enforcement," fumes Mike Clark, a lecturer in the pathology department and a keen opponent of the scheme.

Dr Clark worries that the university will sell its intellectual property wholesale to an over-mighty bidder; others are concerned that it will cost Cambridge its creative edge.

"The university has so far had a policy to have no policy on intellectual property," insists Chris Padfield, head of the Corporate Liaison Office.

"The purpose of this move is to have a crystal clear situation, so both academics and venture capitalists know where they stand."

Transport crunch

Silicon Fen may yet dodge this bullet: an outcry among dons has persuaded the authorities to refer the matter back to a committee.

Tougher to avoid will be the region's mounting misery over infrastructure.

Rail links to anywhere but central London are patchy: "Getting to Heathrow from Cambridge is pue hell," sighs John Hodgson, chief executive of Cambridge Silicon Radio:

Cambridgeshire's road to hell, at a quiet moment

Housing is pricey: the county is second only to leafy Surrey in expense, forcing many Cambridge workers to scurry off to cheaper Huntingdon or beyond.

This, combined with rapid business expansion and the pedestrianisation of central Cambridge, leaves many main roads woefully congested - especially the much-cursed A14, a crucial route between the Midlands and the East Anglian coast.

"The situation is desperate: some of our brightest people are forced to spend two hours a day each way stuck in traffic," says Dr Hauser.

Stuck in a jam

According to the GCP, �2bn will be required to bring the region's infrastructure up to scratch.

Planners point to the example of Munich, where the city authorities invested an equivalent amount to facilitate a far smaller hi-tech zone.

The GCP is asking central government to stump up some �700m to help finance a raft of projects, arguing that the economic boost from Silicon Fen more than justifies the outlay.

The government has, in theory, approved improvements to the A14, but the wheels of such projects move at a glacial pace.

In the meantime, the jams on the Huntingdon road could be holding up more than just the traffic.