Craven Cottage occupies a prime riverside location

Fulham's plans for a short-term deal were scuppered amid reports of a row with Blues chairman Ken Bates over a multi-million-pound compensation payment.

A Cottagers spokesman said: "We're disappointed negotiations have broken down.

"We've established a very good relationship with Chelsea and were confident we could do business for a short-term groundshare, which would have benefited both clubs."

A statement from Chelsea Village plc, the owners of Chelsea FC, said: "Discussions were held last week in Paris but no agreement was reached.

"Substantial investment has been made by Chelsea in developing Stamford Bridge into a world class stadium.

"Ground-sharing would inevitably bring with it a significant disruptive and depreciating factor.

"The proposal to Fulham, which was agreed by the Chelsea Board, reflected those considerations."

It is still my preferred opinion to redevelop the Craven Cottage site, but only if it is financially viable Mohamed Al Fayed

Mohamed Al Fayed's club were eyeing the move while they decide between a scheme to renovate their traditional Craven Cottage home and building a new stadium on a different site.

Fulham have played this season's home games at Queens Park Rangers' Loftus Road ground in west London.

But the arrangement has only one more year to run before Premier League regulations requiring a redevelopment of the Division Two ground come into effect.

Al Fayed, who announced the club's record annual losses of �33.6m for the year to June 2002, said: "In the long term it is clear that we must take stringent measures if we are to build a club that will last another 100 years and be financially strong enough to challenge for top honours.

Fulham vow to cut back

"We embarked on a groundshare at Loftus Road stadium while plans for the redevelopment of Craven Cottage were being progressed.

"However, the financial constraints outlined have made it impossible for us to continue with such an extravagant plan.

"It is still my preferred opinion to redevelop the Craven Cottage site, but only if it is financially viable and makes sound business sense.

"If this proves impossible, an alternative site will be obtained and Fulham Football Club will eventually play in a stadium of its own."