From the alleys of Mumbai to the Hollywood hills; it has been a magical journey for the cast and crew of Slumdog Millionaire. But it was a journey made via Britain. Slumdog’s eight Oscars at the 81st Academy Awards represent quite a triumph for the UK film industry.

The film had a British director (Danny Boyle), a British screenwriter (Simon Beaufoy) and a British production company (Film4). Slumdog would not have been made without the drive and vision of Tessa Ross of Channel 4. It was Ms Ross who saw the potential of the original novel and picked out Mr Beaufoy as the perfect writer. She also had the savvy to bring Celador, the makers of Who Wants to be a Millionaire?, on board at an early stage.

It is all quite a reversal. The British film industry was in a bad way earlier this decade. The Government’s attempt to close a tax loophole threatened the funding of scores of productions. A stream of critical and commercial flops, most notoriously Sex Lives of the Potato Men, had prompted several critics to draft the sector’s obituary.

But there has been a magnificent rejuvenation in recent years with successful releases such as Atonement and Mamma Mia!. And now comes Slumdog. Mr Boyle’s gripping tale of life and love in the slums of India’s commercial capital has already grossed more than $159m (£109m) worldwide, including $98m at the US box office. So much for the idea that Americans are not interested in “foreign” films.

Some complain that much of the funding of the UK film industry comes from Hollywood studios. It would certainly be preferable if more of the profits were retained in Britain. But it makes no sense to make the best the enemy of the good. And there is much good that comes from US investment. The British film industry is estimated to employ around 33,000 people and contributes around £4bn a year to the economy. Such sums are not to be sniffed at, particularly in such difficult economic times.

But there are clouds on the horizon. Some 111 films were produced in the UK in 2008, down from 126 in 2007. Investment also fell by 35 per cent. The number of films in production is expected to shrink this year too as private sector financing becomes more scarce.

The fall in the value of the pound should help make British talent and expertise more competitive internationally, but there are structural challenges too. Film4 has been a powerhouse in developing British film talent but uncertainty surrounds the production company’s parent broadcaster, Channel 4, which has seen advertising revenues fall away alarmingly. Even as Film4 celebrates its greatest commercial success, its very future is on the line.

The Government should not be shy of supporting the domestic film industry. The advantages of the English language and the size of our post-production sector provide a considerable opportunity to increase market share. In fairness, government tax credits already make filming in Britain around 20 per cent cheaper than in America. And this has been useful in attracting financing from foreign studios. But ministers might well need to do more, particularly to help UK production companies and domestic studios.

What is needed is strong leadership and long-term investment. The success of Slumdog Millionaire has shown what the British film industry is capable of, given the right backing. It would be a terrible pity if the journey were to end here.