The North Yorkshire Moors Railway welcomed a record number of visitors to the heritage line in 2009 sending turnover steaming past the £5 million mark.

But bosses are also aware they now face a "particularly tough year" if they are to keep the business on the right track and complete two major developments.

Figures reveal that a total of 350,000 people enjoyed a day out on the Pickering-based railway, 11 per cent up on 2008, with overall turnover increasing by seven per cent from £4.75 million to £5.08 million.

Income from passenger fares hit the £3 million mark for the first time.

Philip Benham, the railway's general manager, said: "We are obviously very pleased at these record trading results at the end of a year that started with great uncertainty over how the recession might affect us.

"Everyone associated with the railway can feel justly proud of these achievements as a fitting tribute to the commitment and passion of our staff, many of whom are volunteers.''

Railway chiefs put their success down to several factors including improved marketing and the growing attraction of Whitby as a destination.

They also believe there were more people holidaying in home which, they say, is partly due to the recession as well as the low value of sterling compared with other currencies.

But a new year brings challenges old and new.

Mr Benham said: "These positive results are vitally important as we start a particularly tough year with many challenges.

''Running a heritage railway such as ours is becoming increasingly expensive as infrastructure, not to mention our historic locomotives and rolling stock, get ever older and more costly to maintain."

There has been a "dramatic" increase in running costs through the cost of coal, diesel and other oil products, the costly restoration of a locomotive and the replacement of Bridge 30 between Goathland and Grosmont which was hampered by the worst winter weather for 30 years.

"We have been greatly helped by the £670,000 in grants and donations raised through our Bridge and Wheels Appeal," said Mr Benham.

"We are most grateful to all who have responded so positively, but this remains one of the most complex and expensive projects the railway has ever undertaken."

He added: "There is still much uncertainty about trading prospects for 2010.

''At best the economy is barely out of recession and with job losses threatened virtually on our doorstep in Teesside and elsewhere in the North East, we have to be prudent and must ensure we manage the business with great care.

"So we approach the year ahead with confidence, but mindful of the need to deliver value for money in all we do, and a visitor experience second to none.