The new terminal will allow cruise liners to dock in the city

The project will see a 350 metre (1,148ft) extension to Princes Dock, which is due for completion by 2007.

The site is being developed by Liverpool City Council and Peel Holdings, with funding from the North West Development Agency (NWDA).

Council Leader Warren Bradley said work was now "full steam ahead".

'Tourist influx'

"I know people have been waiting for work to start on this scheme and wondering when it will get under way but we have had to wait," he said.

"Firstly, while the Government agreed the Harbour Revision Order, and then Peel Holdings' takeover of the Mersey Docks and Harbour Company had to go through before we could get involved in detailed discussions with them.

"We have worked well with Peel to ensure that this exciting scheme will become a reality.

"Now we can look forward to seeing some of the most impressive vessels in the world berthed at a World Heritage Site.

"They will bring a great influx of tourists to the city and the wider region and be here in time for our 800th birthday and Capital of Culture."

Liverpool Vision, City Focus, Government Office North West and the Mersey Waterfront Regional Park are also involved, with additional funding from the Merseyside Objective One programme.