THE stalled £335million regeneration of Millbay Harbour is getting under way at last – but without a planned showpiece hotel.

Work will begin next month to dredge the inner harbour and repair the crumbling quays, but eye-catching plans for a five-star hotel on the historic Clyde Quay look likely to be ditched.

A £4.5million injection of cash from the Government's Homes and Communities Agency will allow infrastructure work to go ahead on the 19.5-acre site, opening the way for the scheme to take off as soon as economic recovery arrives.

The dredging, which will remove 40,000 cubic metres of material, is designed to do away with the need for a rising cill to keep water levels up in the inner harbour.

Two blocks of apartments – Cargo and Phoenix Quay – have been the main signs of progress on the site up to now.

Cargo is mostly occupied, but the Phoenix development by Midas Homes was stalled until an injection of Government cash breathed new life into the project last week.

During a tour of the site last week, English Cities Fund (ECf) project director Robert Poole said: "We are reviewing the masterplan for Millbay and the hotel is under review."

He said a hotel was unlikely to be viable. Instead, ECf hoped to build more housing on the quay to fund the development of the rest of the site.

Plans for a rising cill or lock-gates had been dropped because of the high cost of installing and maintaining them, said Mr Poole, but the inner harbour would be dredged to give at least a metre of depth during the lowest tides. Parts of the harbour would be three metres deep at the lowest tide, allowing bigger yachts to stay afloat.

Clyde Quay would be raised by 1.5metres because of fears about flooding and rising sea levels, and the end of the quay demolished and rebuilt.

Historic walls around the inner harbour would be repaired, and sloping stone revetments built on part of the southern side of Clyde Quay and the northwestern corner of the harbour.

Cllr Ted Fry, the city council's Cabinet member for planning and regeneration, welcomed the revival of the Millbay project.

"It's absolutely wonderful," Mr Fry said.

"It's understandable that we have to review the masterplan. The more a scheme is delayed, the more likely you are to need changes."

Mr Fry said the council was doing its part to push the scheme along by getting work started on the new Life Centre in Central Park.

Once the Life Centre was completed, in September next year, the council would be able to demolish part of the Pavilions, allowing the creation of a new boulevard to link Millbay to the city centre.

Mr Fry said he believed there was a good chance that a plan by Associated British Ports to build a cruise liner terminal at Trinity Quay, to seaward of Clyde Quay, would become a reality.

Duncan Cumberland of ECf said: "We'll have to have a chat with the city council about the hotel.

"There are all sorts of issues about having a tall building on the quay. Parking is one."

He said the plan for the quay included a boardwalk over the revetments.

"If you have restaurants and bars along the quay, how do you service them?" he said. "You want pedestrians to be king, but you still need the barrels of beer coming in."

Mr Cumberland said the infrastructure work should be completed by towards the end of this year, with the first building starting early next year.

The Millbay regeneration scheme envisages 1,200 homes, plus new shops, parks, and play areas, creating 1,500 jobs.

The Government has pledged £7.8million to help with the scheme through the recovery, in addition to a £38million programme to build 530 new council homes by 2011, of which more than 300 will be available for first-time buyers.

The city council says it is hoping to create a leisure destination for the South West, with waterfront bars and restaurants and a 'continental-style' boulevard bringing visitors down to the harbour.