When Russell Sage put a heap of gleaming coins center-stage at his show as payback to his mortgage-lender sponsors, Britannic Money, the audience had an opportunity to contemplate the deeper symbolism: Can UK fashion stay solvent?

If money was in the spotlight, though, talent—and lots of it—was also on display. As his first model appeared in a waisted, full-skirted dress made from eighteenth-century golden silk curtain fabric, complete with tassels fringing the hemline, Sage instantly proved the value of British designers' gloom-busting resourcefulness. He followed up with equally spirit-lifting, richly romantic one-of-a-kind pieces fashioned, Scarlett O'Hara-wise, from antique drapes. Sage's silhouettes might be vaguely outlined on 1950s couture volumes, but his crafting of materials, raw edges, arty embroideries and jigsaw-puzzle piecing are strictly 2002. And after mastering the new feeling for gilded fabric, he effortlessly nailed another major trend: brilliant chunky knits. Working with Bidyut Das, a knitwear graduate from the Royal College of Art, Sage sent out a spectacular high-waisted gray wool dress, knitted in graduated stitch to fall to the floor in sculptural waves. Wound along one arm was a huge spiral glass armlet with a $25,000 diamond embedded in it.

Cash-poor but imagination-rich, London designers like Sage still have the optimism (not to mention sponsors like the Diamond Information Centre and Swarovski) to help them face the challenge of staying afloat. "It's really tough," he says. "But I don't think I could show anywhere else. And remember: McQueen and Chalayan came out of London's last downtime."