The economic climate has scuppered a bid to construct a new hotel in Londonderry.

A local development company has withdrawn as the preferred developer of a £23m scheme to transform the former City Hotel site in Derry City.

Big Picture Developments Limited informed the Department for Social Development that given the current economic climate, the state of the apartment market and the speculative nature of office space in Derry, they could no longer proceed with the redevelopment.

In addition the hotel operator secured for the scheme has advised Big Picture that it no longer wishes to be involved.

Brian Doherty, Director of DSD's North West Development Office said: "Considerable time and effort has been expended by all parties in developing what has been widely acknowledged as a scheme of the highest quality.

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"It is therefore disappointing that market conditions are such that delivery is not now possible."

A spokesperson for Big Picture Developments Limited added: "Despite the huge effort expended by Big Picture in developing a high quality scheme for the Foyle Street site, market conditions, in particular the cessation of construction funding for property development projects, the collapse in the residential property market and the challenging commercial property market, means that the project is not currently viable.

"Big Picture would like to thank DSD for their co-operation and valued assistance on the Foyle Street site over the past four years."

Brian Doherty concluded: "The Foyle Street site remains in the ownership of the Department and will serve as a compound for the contractor delivering the city centre Public Realm Scheme until July 2010.

"The Department then proposes to landscape the site to create a shared space linking the Scheme at Guildhall Square with the Peace Bridge.

"Departmental officials are also liaising with the Department for Regional Development, to consider the possibility of including car parking to address some of the demand for additional spaces in the city centre."

(NS/BMcc)