From up here on the Canal Basin bridge there is a view over Coventry, over the ring road, the church spires, the high-rise flats. On a pale afternoon we stand watching the cars follow signs to Birmingham, Warwick and medieval Spon Street. Below us, the Post Office workers are trickling back to the sorting office, and a woman pushes a pram towards the shopping centre. All around is the sound of things being built or knocked down, a city rethinking itself.

This city was immortalised in song 28 years ago by local band the Specials. They portrayed the sense of defeat in Britain during the early 1980s, when the country was in the throes of recession and the Conservative government began its programme of privatisation. The manufacturing heartland of the Midlands was especially hard-hit; in Coventry, unemployment stood at 20%, one of the highest rates in the UK. "This town," sang the Specials, "is coming like a ghost town."

Next week the band is set to return. Having re-formed and enjoyed a successful reunion tour, they will play a sold-out homecoming gig at the Ricoh Arena. "I'm going!" nods a woman in the tourist office. "I kept phoning and phoning the ticket hotline until I got through!" There seems something timely about the Specials' return to this city as Britain finds itself once more in recession. "No job to be found in this country," they sang in 1981. "Can't go on no more/ The people getting angry."

Coventry has a history of reinventing itself. Along with the famous cathedral, the city was heavily bombed during the second world war and was rebuilt in blocks of grey concrete. It established a new reputation based on bicycles, motorcycles, tractors, buses and cars. In the 1950s and 60s it was a boomtown, the fruits of its motor industry funding a new theatre and an art gallery. Now the car companies have all left, save for the design headquarters of Jaguar and the company that makes black cabs, and it is left to the Transport Museum to tell the story of the city's manufacturing glory days.

Outside an employment agency stands Raj Gill who declares that he loves this city "more than any other". For 30 years he operated machinery for a hydraulic engineering firm, but when the company went bust in 1987, he found himself without a job. Since then, he has struggled to find permanent employment. The agencies, he explains, offer little beyond three days' work. "Then you don't know where you are," he says. "People are trapped."

Today, the old post office is re-opening as a pawnbroker and outside there are shiny gold balloons and a town crier who rings a bell, blows a trumpet and promises a visit by television's David Dickinson. Many of the nearby streets run with To Let signs, charity shops and discount stores.

Time has brought other changes, too. The nightclub Locarno - referenced in Ghost Town's lyrics "Bands won't play no more/too much fighting on the dancefloor"- is now the Central City Library. In the space where people once danced, kissed and watched bands, there are cookery books, biographies and teen romances.

All across the city linger memories of the Specials: the new plaque by the canal that commemorates the 2-Tone trail relating to the band's record label; the couple who own the nearby tattoo parlour, he telling of the customers who come in wanting Specials tattoos, she with her recollections of the band member who was once her babysitter. A few doors down the Lock Gallery is staging one of several exhibitions planned for this year's 30th anniversary of 2-Tone. The photographs show the bands and their fans with shaved heads, braces, broad grins - Madness, Bad Manners, the Specials, their faces frozen in black and white; young, bright and hopeful.

A sense of hope permeates the city on this grey midweek afternoon. Against the gloom of pawnbrokers, pound shops and concrete, there's a ferocity of colour: the yellow, maroon, and violet in the floral displays, the glorious stained glass of Holy Trinity Church, and from the bridge, a view of green leaves, and cherry blossom falling on the pavements.