At least £100m was meant to be spent transforming the site around Humber Street, which was the centre of Hull's fruit trade for nearly 200 years, into a "world class" mixed-use development combining work, residential and leisure space.

Most of the money will come from the private sector but some has to come from the public sector.

English Partnerships is the largest public investor but relies on land receipts for much of its income. Earlier this year it was hit by the housing market downturn. It is now being merged with the new Homes and Communities Agency which comes into being on December 1.

Officials at urban regeneration company Citybuild say they are still confident they will get funding but may have to look at alternative sources of cash.

Development director John Haymes said regional development agency Yorkshire Forward had stumped up stopgap funding. He said: "We are now addressing with English Partnerships the longer-term funding after this current year.

"English Partnerships are seeing whether they can get additional funding not just for these projects but across the country.

"We are hoping in terms of the Fruit Market a clear position will be reached by Christmas and (they will) tell us whether we have the funding package or whether we have got to approach an additional funding source.

"It's better news than a lot of projects elsewhere in the country – at least this one is top of the list. It is recognised as a priority project.

"There are others we know of which aren't going to be so lucky."

Mr Haymes said that if English Partnerships were not able to get the funding it would go to Yorkshire Forward, Hull Council or the new Homes and Communities Agency.

Jan Anderson, environment director at Yorkshire Forward, said: "This is a difficult time for the development industry and Yorkshire Forward is working hard with partners to minimise the impact of delays on key developments in the region by providing support where possible.

"All partners involved in the Fruit Market recognise that the development is, and will remain, a key scheme for Hull and our objective is to ensure that it can be delivered once market conditions stabilise."

Meanwhile a new planning application is going in with revised proposals for a new home at Priory Park for fruit market traders being displaced by the regeneration scheme. Residents had been unhappy about the new market, claiming their lives would be shattered by the 24-hour operation. The new designs reorientate the building to provide a better screen to the north and reposition the car parking and servicing.

If planning consent is given then building should begin early in 2009, with fruit traders moving in around 12 months later.

The other major stumbling block has been land assembly.

Hull Forward now owns or has control of over 85 per cent of the properties but some owners are still unwilling to negotiate. An attempt to compulsorily purchase outstanding properties would almost inevitably lead to a public inquiry and more delay.

The protracted development is not helping the few businesses serving the public which are left in the area.