Biggest Fringe venue - the Assembly Rooms - plunged into crisis over lottery failure

A £12 MILLION revamp of Edinburgh's biggest Fringe venue has been plunged into turmoil, after it was snubbed for National Lottery funding.

A controversial overhaul of the Assembly Rooms in George Street is almost certain to be shelved after a bid for 2.7m in lottery cash was thrown out.

The building was supposed to shut for 18 months in the run-up to the 2012 Festival, to restore it to its former glory, allow new shops to be created and transform one of its biggest spaces into a fine-dining restaurant. But the Heritage Lottery Fund (HLF) told The Scotsman that the project, which had been opposed by the promoters of the Fringe venue, had been turned down for a second time in recent months.

Details of winners in the latest round of HLF funding will be unveiled on Monday.

Senior councillors insisted they would not abandon plans to overhaul the building, saying urgent action was needed to address its "dilapidated" state. However, the city council will be forced to produce a more modest scheme that will secure the future of the A-listed building, which dates from 1787. It is estimated it will cost the local authority almost 5m to carry out the kind of repairs needed to the main public areas of the building.

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Emergency work was required last year on the venue's flagship ballroom, ruling out its use during the Fringe, and there are fears other major problems may be uncovered in the next few years.

A report for the city council this month warned the project could not go ahead without HLF funding, even though the local authority had earmarked the Assembly Rooms as having a key role to play in Edinburgh's contribution to the UK-wide Cultural Olympiad being held to coincide with the 2012 London Olympics.

The failure of the council's bid for HLF money has thrown into doubt almost 500,000 worth of funding that had been pledged from Historic Scotland and the Scottish Arts Council.

The council has been criticised for prioritising the Assembly Rooms revamp ahead of the King's Theatre, which needs some 20m worth of repairs. A council application to the HLF to help revamp the King's also failed.

Deputy council leader Steve Cardownie said: "We have tried our best to secure HLF funding, but now we will have to see what we can do to plug the gap. It is imperative the building is refurbished, and nothing will deflect us from that course of action."

Colin McLean, head of the HLF in Scotland, said: "The Assembly Rooms are an important part of Edinburgh's heritage, and we discussed in great depth the council's plans to renovate them.

"This was a highly competitive round of decision-making, and unfortunately we just didn't have enough money to support all the projects we looked at on the day."

Historic Scotland, which has pledged 318,000 in funding, said: "We are awaiting further details from the city council before a final recommendation can be reached."