While the last recession in the early 1990s was nothing compared with the current global economic meltdown, it hit Brighton harder than most parts of the UK.

The town, as it still was then, was struggling to shake off its reputation as “Skid Row-on-Sea”.

While it might have had its Bohemian charm, many of its streets and shops were run-down and unemployment was rife.

Anyone wanting to see how far Brighton has come since those dark days needs only to look through the report published on Monday by Centre For Cities, a leading think-tank that compared the economic outlook for different parts of the UK.

Brighton, now combined with Hove of course, was named as one of five cities to watch because of its strong private sector, high levels of entrepreneurship, highly educated workforce and large share of high-level jobs.

This success comes as no surprise to one of the city’s leading entrepreneurs.

Darren Fell sold his email marketing firmPure for £4.5 million in 2008 and has now set up Crunch.co.uk, an online accounting system designed for freelancers and contractors which has attracted investment from the chairman of Skype and founder of Bebo.

Mr Fell said: “Entrepreneurship is driving the city forward.

“I feel that going back in time there has always been something in Brighton with its hippy values and people being more self sufficient and interested in doing their own thing.

“There is an energy in the city and many people are choosing to leave their corporate jobs and become micro-entrepreneurs.

“Many of the web-based companies in Brighton have barely been touched by the recession and for us it has been a brilliant time to set up the business.”

Mr Fell’s other venture – freelanceadvisor.co.uk – where established and would-be freelancers can share information and get advice, has 11,500 visitors a month and is growing by 15% month by month.

He said: “We recently had an event in The Eagle pub as part of National Freelancers’ Day.

I expected about ten people but the place was packed.

We had everyone from a piano tuner to an interim management consultant.

“If you have lots of individual freelancers making their own business then you will get through any credit crunch quicker and earlier.”

The spirit of entrepreneurship within the city has had a knockon effect on surrounding areas.

Towns such as Haywards Heath are becoming home to successful start-ups such as Sussex Uniforms, set up by Georgina Audas and Chrissie Wilkie a year ago.

Despite the recession, they quadrupled sales and their achievements were recognised in November when they won the Sussex Business Award for Best New Business of the Year.

Ms Audas said: “It helps that Sussex is a more affluent part of the country but you have also got to have a good business plan and do a lot of research to really understand your target market.”

Ms Wilkie said: “If you have a good idea then go for it.

Everyone should fulfil their dreams.”

While the potential within Brighton and Hove and its surrounding areas is clear, there are still dangers.

Tony Mernagh, executive director of Brighton and Hove Economic Forum, said: “There is a great entrepreneurial spirit here and our birth rate for businesses is very high but many of these start-ups do not survive as long as they should.

“Most businesses do not go under because they are bad ideas but because people have no idea about cash flow, business planning, exploiting newmarkets and things like that.”

There is also the problem that while Brighton and Hove is home to thousands of graduates – with 7,000 more emerging every year – too many are flipping burgers or working in record shops.

Mr Mernagh said more jobs must be created in emerging industries such as digital media and bioscience, while more should be done to exploit Sussex University’s world-leading robotic and sustainable transport departments.

He said Brighton was hampered by lack of space for office development, adding: “It would be great if we could attract another Amex but it would need to build its headquarters here and where would it go?” This problem could mean Brighton losing out to places in the North of England where there is lots of land going spare.

Mr Mernagh said: “Newcastle has been designated a centre for battery technology for Nissan.

That involves a huge amount of research and development and we are missing out.

There is no standing still.

Either you are moving forward or slipping back in terms of competition.”

Julie Stanford, president of Brighton and Hove Chamber of Commerce, said: “We aren’t surprised to see Brighton in such a strong position.

Over the last few months, whatever was happening nationally, we could see the city’s economic turnaround already under way.

“Brighton’s success is also down to the strong entrepreneurial spirit that exists in the city and makes it such a fantastic place to do business.”

Ted Kemble, cabinet member for enterprise on Brighton and Hove City Council, said the council was aware of issues around expanding the economy.

He said: “One of our strengths is the growth in creative industries and the council is leading the way in helping to provide appropriate, affordable accommodation.

Last year we published an action plan designed to encourage companies to invest in the city and create the right conditions for them to do so.”

Coun Kemble said areas such as the New England Quarter beside Brighton Station had been identified as those which could be turned into a hub for the digital media industry.

This will no doubt help that particular sector but it’s also true politicians and business leaders must start thinking more radically if they are to create the high-level, graduate jobs that are vital if Brighton and Hove is to fulfil the potential outlined in the Centre For Cities report.