The area around the cathedral is targeted for regeneration

The proposal was to house the Lyric Theatre, the Old Museum Arts Centre and the School of Music on a site within the Cathedral Quarter.

It was hoped that the move would create a thriving cultural area in the heart of the city.

However, the �27m price tag and disagreements over the details of the plan have seen it fail to develop.

Commercial uses

The proposed site is best-known as the car park behind St Anne's Cathedral in Donegall Street.

There are plans to develop it as a mixed-use scheme incorporating retail, commercial and residential uses set around a public piazza.

BBC Northern Ireland arts correspondent Maggie Taggart said there were a number of reasons for the decision to take the arts centre plan back to the drawing board.

Firstly, it was much more expensive than they thought, she said.

Also, there were worries from the Old Museum Arts Centre that they would lose their autonomy under the new arrangements.

Cathedral Quarter will not happen in any meaningful way if that arts centre does not go ahead Martin Lynch

It is understood the Department of Culture, Arts and Leisure (DECAL) were about to announce that the plan was no longer viable.

Well-known playwright Martin Lynch, a leading supporter of the Community Arts Forum's Let's Get It Right campaign, said it was "absolutely imperative" that the Arts Council and DECAL put together "a critical mass" to allow the arts centre to happen.

"Cathedral Quarter will not happen in any meaningful way if that arts centre does not go ahead," he said.

Mr Lynch said that Belfast was not thinking along the lines of a modern European city.

He said: "If you look what Dublin has done; if you look what Bilbao has done in building the Guggenheim centre. They have brought the Guggenheim arts centre to a small provincial town in Northern Spain, why can't we do that?"

'Economic renewal'

Mr Lynch said that the regeneration of the Cathedral Quarter was being driven by Laganside Development Corporation.

He said: "Laganside Corporation, while doing a fantastic job by the riverside in economic renewal, are not the body to develop a cultural quarter."

Plans for a huge commercial development with a 650-space car park with its back to the Cathedral Quarter were "crazy", Mr Lynch said.

"One part of our people in Belfast is trying to develop this vibrant, cultural and youthful quarter and the other half is building a shopping centre which is going to help destroy it," he said.

"All we want is some joined-up thinking.

"We want simple common-sense development which allows Cathedral quarter to develop and shopping that services the requirements of the city centre as well.