"It's very hot," laughed one, about 13 years old, grinning to show silver braces on her teeth. We are in Ísafjördur, a northern Icelandic town a whisker away from the Arctic Circle and it is 10:30 pm in early August. It's as bright as midday and we are shivering in our coats. I'm shivering just looking at these kids splashing about in the cold water as they enjoy their summer vacation. The air temperature is about 9C.

We have come on a quick break to visit the West Fjords in Iceland and have a chat with Gudmundur Kristjánsson, the harbour master of the region's capital. Home to about 3,000 people, Ísafjördur's economy is built on fish. The town, whose name means ice fjord, is dramatically set on an elbow of land, called Eyri, that is no more than a sandspit jutting out into the shelter of the head of the fjord. Either side of the town the mountains sweep several hundred metres high.

Ísafjördur, by far the largest settlement in the West Fjords, is so tucked into the fjord and surrounded by the mountains that for nearly two months every year the sun fails to appear. In early December the sun slides over the mountains for the last time until 23 January, when from a street called Solgata (literally Sun Street) locals will keep watch for the first sighting of the sun.

For about half a minute the sun will peep over a tiny dip between the mountains. The appearance at about midday heralds in what Isafjordians call their sólarkaffi - sun coffee, when they visit each other's houses to party, drink coffee and whip up some pancakes.

In the summer the town is bustling and gives all the outward appearance of a booming local economy, even on the first day of our visit which is an August public holiday. Four of Iceland's oldest buildings, dating from the eighteenth century and made of timber inevitably imported since Iceland has very few trees, can be found near the harbour.

We wander around the port, where the smell of fish permeates your nostrils, gazing at the fishing boats ready to head out for sea and watching as the fish are loaded off the boats to be cleaned and gutted ready for transport. Suddenly Sam pshaws us.

"Hey, come and talk to me," he says. He came here a couple of years ago from Morocco, the only one he knows who has emigrated to these parts.

He coils the fishing lines that the boats will use out at sea, neatly arranging them inside large white buckets and baiting them with fresh whitebait, or a similar tiddler. Each line has 500 hooks and needs to be wound into the bucket in such a way so out to sea the fishermen simply throw the lines overboard to unravel without tangling. Within minutes the fishermen will be hauling their writhing catch back on board.

"This is good money, much better than anything I could get in a factory in England," Sam grins. "Here I earn ISK 2,200 (£19.50) a bucket, and each boat can take as many as 24 buckets with them out to sea. I do as much work as I can now and then when they're working I can relax." Behind him are enormous walk-in freezers and fridges to keep his baited buckets fresh for as long as necessary.

He lives in Flateyri but often stays with friends in Ísafjördur when he's working. Flateyri is a pretty village on the other side of one of the mountains on the northern shore of Önundarfjördur, with a population of about 300 that we visited on our way here. A single-lane, rather dark tunnel links Flateyri with the regional capital. Obviously not much traffic flow is expected in the tunnel, which has an added curiosity in that it has a T-junction in the middle to Sudureyri, and cars are expected to give way to oncoming traffic using laybyes.

Flateyri is in rather a vulnerable spot at the foot of a mountain and has become well known for its enormous avalanche defences - two arms of 15 metre-high earth dams to divert the snow away from the village with a protective earth wall between them. They were constructed after the town was devastated 10 years ago by a wall of snow that swept down the slope and killed 20 villagers.

The Ísafjördur Peninsula is geologically the oldest region in Iceland and several glaciers since the time of the Ice Age have gouged into its imposing basalt mountains.

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