Proposals for a Royal Opera House (ROHM) in Manchester are under threat after a study by Arts Council England deemed it "not yet viable" and reliant on central government funding.

The new national theatre, proposed by the Royal Opera House and Manchester City Council, would become a permanent second home for The Royal Opera and The Royal Ballet in the North West from 2013. For the project to go ahead, the existing Palace Theatre would need to be converted at a cost of £100m and central government would have to invest £15m a year to cover the running costs.

The ACE report, conducted by consultant Graham Marchant, said: "Only those wearing cultural blinkers will imagine that this vision will fail to capture the public's imagination, given a fair chance. “The problem will be harnessing all these ideas within an affordable envelope.”

The evaluation examined, in detail, the potential of the plans to expand the opera and dance provision, develop new audiences and provide more training and skills development to the sector. The study also looked at the plans' possible impact on other cultural organisations, including those producing and touring this type of work in the north of England and across the country. According to the Financial Times, the study revealed other Manchester arts organisations were fearful of the impact that the new house would have on their budgets and popularity. So, before the project can progress, further work is needed to ensure the plan doesn't cause unnecessary damage to the area's existing arts infrastructure.

If successful, the Royal Opera House Manchester's programme will be developed in consultation with the Manchester International Festival, The Lowry theatre, the existing Manchester Opera House and music venue Bridgewater Hall. ROHM will work with partners including subsidised companies, international opera houses, commercial theatre producers and artists. Tony Hall, chief executive of the Royal Opera House, said “This is a very exciting opportunity for us to create a wonderful programme of opera and ballet for the North West and deepen our relationship with the Manchester International Festival. It will also create an international beacon for innovation to enable young writers, composers, directors and visual artists to observe and experience the complex creative process of opera and ballet, working with world-class artists and leading academics from Manchester’s universities.”