Prime Minister Tony Blair is considering cutting short next week's Labour Party conference in Brighton.

Mr Blair's official spokesman today said there were strong arguments for and against the event going ahead in the wake of the atrocities in the US.

The spokesman said the Prime Minister's "overall instinct" was that it should take place but he is "actively considering" whether to cut short the five-day conference, which is due to begin on Sunday.

Hotels and restaurants in the city were dismayed at the news and said it could have a huge impact on the local economy.

Richard Baker, general manager of The Grand, said: "The conference is an extremely important event for the city and we will live off it for the next 12 months.

"Not only does it bring the delegates who spend their money but also the national media. If they show the sun shining in Brighton and everyone having a good time it attracts businesses and tourists for the rest of the year.

"I've not heard of any plans to cut the conference short yet. Personally I think it is such an important networking event that it will continue even if the Prime Minister doesn't stay for the duration."

Derek Maddison, manager of Churchill Square, said the impact of a cancellation on the retail sector would not be as great as on the hotels and restaurants.

He said: "The conference is hugely important to the town as a whole but does not greatly affect retail trade. Delegates tend to use the hotels, cafes and restaurants but historically speaking we've actually traded marginally down in conference week."

Speculation at Westminster suggests the event will begin as planned on Sunday but finish on Tuesday after Mr Blair's keynote speech.

At a Downing Street Press briefing this morning, the Prime Minister's official spokesman said: "As everybody acknowledges, we are in a very serious situation.

"The Prime Minister has indicated there is a clear likelihood of military action and of our forces being involved.

"That obviously carries a very high responsibility for the Prime Minister and any Government.

"In this situation, we have to balance the arguments.

"On the one hand, not to go ahead with the conference would be to give in to terrorism.

"On the other hand, it has been said it would be wrong in the currentcircumstances to hold the conference.

"The Prime Minister knows they are an important part of the national and political calendar and his overall instinct is it should go ahead in some form.

"But what form that should be is being kept under review."

Downing Street confirmed it is also considering recalling Parliament for a second time to discuss the crisis.

Meanwhile police officers in Brighton and Hove are pulling out all the stops to conquer the joint threat of terrorists or protesters disrupting the conference.

The Brighton Centre and Grand Hotel were today being turned into an island fortress with galvanised steel crash barriers surrounding their base.

The barriers are intended to stop potential terrorist attackers from ram-raiding the buildings.

Armed police will surround the site. There will be armed vehicle check points across the city centre, stopping and searching selected vehicles and people.

A five-mile air exclusion zone will exist across Brighton and Hove for the duration of the conference.

There is also talk of stationing a destroyer equipped with surface-to-air missiles off the coast to shoot down rogue aircraft.