The UK's brewers are almost as wary as farmers of admitting prosperity, but a new report makes no bones about the dramatic revival of real ale and small-scale production.

Famous for brand names such as Pigswill and Old Leg Over, microbreweries are opening at the rate of almost 50 a year, encouraged by generous tax concessions and drinkers' appetite for new tastes.

Enthusiasts gathering on Tuesday for the start of the annual Great British Beer Festival will toast the data at Earl's Court in London. The capital has seen a particularly strong revival of small brewers despite intense competition from large metropolitan bars. Small breweries in London have doubled since 2006 to 14, with five more due to launch.

Cask beer, real ales and microbrewery sales were up 5% nationally last year, compared with a 2% fall in the beer market overall. The revival owes much to the progressive beer duty relief for small breweries that Gordon Brown introduced as chancellor in 2002. The measure halves tax for brewers making under 50,000 litres a week and tapers duty up to 300,000 litres.

A report at the time of the spring budget recorded 767 small breweries, compared with 480 of all sizes in 2004 and 141 in 1970. Professor Peter Swann, a specialist in industrial economics at Nottingham University, called the sector the perfect example for coalition hopes of revitalising manufacturing with small and nimble businesses.

Colin Valentine, chairman of the Campaign for Real Ale (Camra), said the microbrewery total had since passed the 800 mark.

He said: "It's strange to think that at the turn of the 21st century the real ale market was in decline, and many predicted a further downturn in fortunes. Yet in the present day, real ale brewing is recognised as one of the most vibrant areas of the small business sector, and we now enjoy more brewers than at any time since the end of the second world war.

"There are promising times ahead for the industry when a new era of discerning consumers are demanding quality products that are locally produced and represent good value for money. The fact many brewers in the current climate are reporting record sales increases shows this renewed interest is not about to end."

This year's festival has a focus on London, whose beer enthusiasts suffered a calamity in 2006 when Young's Ram brewery in Wandsworth closed. Successor beers have proved popular and Des de Moor, author of Camra's new guide, London's Best Beer, Pubs and Bars, said: "Although London's groundswell of exciting new brewers may not yet reach the production levels of the post-Victorian era when in 1905 the capital's brewers produced almost a billion pints, the city's brewing industry is once again revered for its innovation and craft."

Typical examples of new businesses keeping below the tax barriers are Kernel, brewing 14 different ales in a railway arch at Bermondsey, south London, and Sambrooks, on Young's former patch south of the Thames.

Duncan Sambrook, a former City of London accountant who turned to brewing, said: "It was at the Great British Beer Festival at Earls Court back in 2006 myself and friends hatched a plan to bring brewing back to the centre of London. When we first started up there were more outlets crying out for quality local beer than we originally thought.

"The London pub market is so big that it's got the potential to support another boom in the next five years, so long as our beers retain a high quality and continue to push the boundaries."

The boom is reflected across the country, with the Ilkley microbrewery in North Yorkshire seeing a 500% sales increase since its foundation two years ago.

Case study

A year after launching, Martin Kellaway and six colleagues at the Wharfebank microbrewery in Pool, near Leeds, are delighted with their steady progress built on very close links with landlords and distributors.

The little company's two trucks head out for carefully chosen pubs and other outlets within a tightly defined area – the three ridings of Yorkshire, with a chunk of historic Lancashire, up to the centre of Manchester, thrown in.

"We've got a business model which takes us beyond the limits of progressive beer duty, but we're not in any hurry," said Kellaway, who worked with Caledonian, Bass and Fullers before going independent. "We've a 20-barrel brew plant and we brew six times a week at the moment. It's working well because we deal with people who value the quality of the beer as much as we do.

"There's no undercutting going on because of the lower duty. It's helpful in lots of ways as we build up a structure of production and delivery, but we don't want less than the best hops and best malt we can find. The beer's a premium product and that is what our customers are looking for. But all businesses have to look out for innovation and opportunities."

Wharfebank's small size has led to projects such as the joint renovation of the Fleece in nearby Otley, with the national pub chain Punch. "We're brewers and Punch have the marketing expertise – I think they're treating the project as a bit of a guinea pig. There's room for a beer garden down to the river, so the pub's Wharf bank, like us."