A source close to the project told Building: "We are pessimistic. We are expecting the project to be cancelled."
But there is speculation that London mayor Ken Livingstone may use the money saved to help build an Olympic-standard stadium in east London.
A Greater London Authority spokesperson said Picketts Lock has not enjoyed Livingstone's full support, whereas he is keen on an Olympic bid. He said: "Ken has spent a lot of energy looking at the Wembley stadium project, and has not stood either way on Picketts Lock. He has always said he'd support an Olympic bid if it is for east London, particularly if it is in the Stratford area."
The Picketts Lock stadium, designed by Newcastle architect FaulknerBrowns, was to have been used for the 2005 World Athletics Championships.
Sport England, the body that distributes lottery funding to sports projects, is currently considering a report from independent consultant Patrick Carter on the viability of building the stadium at Picketts Lock.
Carter's report is expected to claim the project is not viable and estimate that building the stadium at the north-east London location would cost about £110m.
A spokesperson for the Lee Valley Regional Park Authority, joint sponsor of the Picketts Lock proposal with UK Athletics, said if Sport England decided not to contribute an agreed £60m-worth of funding, that would be the end of the project. "As far as we are concerned, no money means no stadium."
But moves to put together an Olympic bid are gaining momentum. At the end of August, regeneration body the London Development Agency placed an advertisement in the European Union's Official Journal inviting bidders to draw up a feasibility study for the plan.
Between 15 and 20 proposals have been received, with companies teaming up to tackle the wide-ranging brief, which includes urban planning services and economic planning. Among the bidders is consultant Arup Associates, whose director Tony Broomhead said: "We have submitted an expression of interest. The brief is strongly economically based, requiring groupings of bidders with broad skills."
Arup Associates is thought to be in a strong position to take on the brief. Over the summer it produced an independent report into the feasibility of an Olympic bid, concluding that Stratford was the ideal location due to its strong transport links.
Up to seven bidders will be invited to tender later this month.
