Developer Urban Splash's heavily delayed £42m Fort Dunlop regeneration scheme in Birmingham has been given the go-ahead.
The scheme, on the site of an old Dunlop factory on the M6, was due for completion this year but has been dogged by changes to planning and funding laws.

Schemes requiring more than £5m "gap funding" from regional development agencies now require approval from the government's central project review group. It is understood the review group has told Urban Splash and architect Shed KM that it has agreed to let regional development agency Advantage West Midlands give the scheme the £10m it requires to start work.

A spokesperson for Urban Splash would not confirm that it had received the go-ahead, but said: "We are expecting a favourable decision." Sources close to the developer said it had been told verbally of the decision but has yet to receive written confirmation.

The scheme will be one of the last to be granted gap funding – through the Partnership Improvement Programme – which allows government to help cover the cost of schemes not otherwise commercially viable. The European Union has recently deemed this practice illegal on the grounds that it inhibits competition.

The project was also complicated by planning regulation PPG6, which in effect outlaws out-of-town retail development. The scheme was originally set to include a large amount of retail use and now incorporates 32,500 m2 of office space for start-up companies and 2300 m2 ancillary retail space.

The development is unlikely to be completed until late 2004. Detailed planning permission is expected to be in place by spring next year. The scheme has outline planning permission for leisure and hotel uses, which may yet be incorporated in later phases.

The site is owned by the regional development agency and has been derelict since Dunlop left in the 1980s.

The move is the latest boost to Urban Splash's regeneration portfolio. Its planned refurbishment of Manningham Mills in Bradford has been delayed because of similar problems, but £4m has been earmarked in regional development agency Yorkshire Forward's budget to cover most of its additional funding needs.