Interest rates have fallen to 1% - an historic low delivering a cash bonus to borrowers across the UK as their loan repayments plummet. On top of this tumbling inflation, declining fuel bills and reduced VAT are having a positive effect on disposable income. With smaller bills and more cash at the end of every month, many of those workers who are still in work have never been better off.

Disposable income per household is predicted to rise by 3.3% in 2009 compared to less than half that figure last year and no increase at all the year before.

A lot of this increase will be swallowed up by increased savings as households hoard cash fearing that they may lose their jobs. Consequently all commentators expect consumer spending to be reduced this year but there is considerable variation in the predictions about how much. Britain’s shopping habit is unlikely to die completely but for the hundreds of thousands of retailers expecting the worst the exact measure of decrease could be crucial. Big ticket items that require credit (and confidence on the part of the purchaser) will undoubtedly suffer but the picture could be better for retailers selling smaller, less expensive merchandise.

Retail sales in Brighton city centre declined by 0.5% in 2008 and this is the prediction from Morgan Stanley for the decline in total UK sales in 2009 which, if true, is very survivable. Confidence is the key to consumer spending and the Nationwide index of consumer confidence is at an all time low but given the gloom and doom in the media and the reality of rising unemployment it is hardly surprising.

It is important to remember that while job losses and the squeeze on credit will be a nightmare for some people they will be very much in the minority. The vast majority of people will have more money at their disposal and, after a bout of panic saving, they will start to spend some of it. Perhaps not at the same rate as the boom years but perhaps fast enough and in sufficient quantities to keep retailers afloat.

Many of the large retailers that have already gone to the wall were badly managed and/or over-leveraged. The very fact that companies like Zavvi have salvaged some of their stores and closed others suggests that many of their outlets were not trading profitably in the first place and their very existence may have been nothing more than corporate vanity or a desperate desire to increase market share.

The footfall figures published every week on this site (see earlier stories) show that increasing numbers of people are visiting the city though clearly spending less money than they did. Their loyalty to the city is important because when the panic thaws and the working public realizes that they are better off than they were in 2008 we want them to spend their money, whether it is large quantities or small, here in Brighton & Hove.

The projected length of the current recession is a matter of intense speculation but the end may come sooner than we think. We need to steer a careful path through the recession and be absolutely ready for the upturn.