In the first of a weekly series on how diverse parts of the capital are faring in the recession, Rosamund Urwin looks at Soho...

Soho likes a fight. Over the years, London's louchest district has grappled with rising rents, big business trying to force its way in and a crackdown on its seedier elements. All too often, its fans have seemed almost eager to sound its death knell.

But instead the area has evolved, losing many of its bohemian drinking dens and shedding some of its sex shops, but retaining much of the character that inspired writers such as Dylan Thomas and Dickens and which kept Jeffrey Bernard unwell.

Now Soho is adapting to its next challenge: the economic downturn.

Walking around its shops and bars at night, you might ask: what recession? The neon-lit alleyways are still buzzing while drinkers spill out onto the pavements outside popular pubs such as the Coach & Horses, Comptons and the Nellie Dean. Many restaurants are busy - if not quite heaving - with pre-theatre diners and tourists. The Pink Pound clearly remains kind to Soho.

But even in this, one of the capital's prime going-out districts, many drinking haunts are hurting. "Overall, Soho is holding up quite well but a lot of bar owners doubtless wish they were busier," Mark Field, Tory MP for Cities of London and Westminster admits. "A large number have said to me that they are struggling."

In fact, some have already thrown in the towel. Last month, the Soho Revue Bar became the latest to close its doors. The nightspot - famed as the UK's first nude striptease club, Raymond's Revue Bar - appears to have called time for good. Up for sale for almost a year after its owner Soho Clubs & Bars went under, its administrators received no offers and have now stopped trading.

Victims of the economic climate are joined by those closed through compulsory purchases because of Crossrail. Soho stalwarts the Astoria, Ghetto nightclub, Mean Fiddler and Sin all shut to make way for the new London rail line. But it is not yet "So Long, Soho". In the long run, Crossrail will give Soho a boost. Field also believes a high turnover of nightspots is not particularly unusual: "Reality is that the timeline of most bars and clubs is quite short. Places are sexy for a while, then things move on."

Meanwhile, Jonathan Lane, chief executive of one of the area's biggest landlords, Shaftesbury, believes that the closures also highlight Soho's shift in focus from drinking to eating out: "The long-term trend is for bars and nightclubs not to do that well. Soho is becoming much more about restaurants." The weakness of the pound, should it continue, will accelerate that change. Western Europeans are currently flocking to the capital and eating out in Soho. Fiona Rhys-Jenkins Bailey, chair of the Soho Society, says: "Lots of cafes and restaurants are doing well as they're getting a boost from all the tourists coming over. Towards the end of the sales particularly, there were so many Europeans here, and Americans too."

Tourism may be protecting eateries from the worst of the downturn, but raise your eyes above ground level and more worrying picture emerges. There are scores of empty offices adorned with "to let" boards. Soho, a centre for the advertising and media industries, is seeing an exodus of businesses that are no longer willing or able to pay the area's high rents. Evidence of this came in Shaftesbury's recent trading statement. Buried in a resilient set of numbers, which must have made it the envy of peers, was an admission: the amount of office space lying empty has started to rise. Inevitably, Shaftesbury and other Soho landlords are being forced to cut prices in a bid to attract - or keep - office tenants.

If the desertion of the Soho media set gathers pace, it will only increase the dominance of venues serving tourists rather than locals. Some are nervous that this could change the area permanently. Sky-high rents also remain a concern for small retail premises - where costs are yet to fall despite the downturn.

But Soho isn't about to become just another bland city centre. Lane acknowledges that one of its main charms is that it has not yet been taken over by the big multinationals. "We have a policy of encouraging independent stores and restaurants and try to avoid chains like the plague," he says.

Meanwhile, Rhys-Jenkins Bailey believes the downturn could help to protect the area's individuality as big chains curb their expansion plans: "We were worried at one point that Soho could end up with wall-to-wall Starbucks. In a strange way, the downturn may end up being a positive - stopping the influx of the multinationals."

Vital statistics

Retail rents (per square foot) 2003: £240; 2007: £275; Now: £300

Office rents (per square foot) 2000: £57.50; 2007: £67.50; Now: £50

Two-bedroom flat 2000: £310,000; 2007: £624,750; Now: £595,000

Total number of businesses in Soho: 3293 Sources: King Sturge and 192.com, business and residential directory website

Life at the cutting edge

Jack Lott, 40, owns Jack's Haircuts, a Soho institution in Old Compton Street. He opened almost two decades ago, and has cut the hair of stars including Robbie Williams and Sienna Miller.

"Our business is doing fine because we're reasonably priced and get a boost from the pink pound," he says. "Some of our regulars have lost their jobs, though. People from the City - as you'd expect - but also people in the media who work round here.

"I think the fancier salons are really struggling. Overall, quite a few shops are shutting down now. My friend had a jewellers on Kingly Street which opened the same year we did and has just shut.

"A lot of that is down to rents. Our landlord, Soho Estates, has been good to us but while the offices above me have had their rents frozen, I have an upward-only lease. A lot of other stores do too, so people are being squeezed. Most of my staff used to have shops near here but they've been forced out because of high rents."

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