British Waterways is to withdraw from the Cotswold Canals Partnership, in which it was the lead partner, by April this year.

The £24m first phase of the scheme, which aims to connect the Thames and Severn rivers for the first time in more than 70 years, could now face a £5m funding shortfall as a result.

Robin Evans, chief executive of British Waterways, said: “We have thought long and hard over this decision and know it will disappoint our partners in the project. Ultimately, however, we have a finite pot of money and the needs of our existing waterways must take priority.

“Around 16 miles of the Monmouthshire & Brecon Canal is currently closed and will require significant investment from us over the next 18 months as we undertake a massive repair programme to reopen it. These works are essential for those businesses and communities that depend upon and contribute to the canal and we are committed to getting it up and running in time for the 2009 cruising season.”

British Waterways said that it remained optimistic that the restoration work would be completed in the future.

“We hope that the £1.5m we have invested in the project to date will help to lay the foundations for the canals’ ultimate restoration and reintegration with the national network,” continued Evans.

“In the meantime we will continue and complete the works at Oil Mills, expected at the end of April 2008, and shall work with the partnership to ensure an orderly handover of all the good work that has been achieved thus far so that it can provide maximum benefit to the remaining partners in the project.” Details: www.cotswoldcanalsproject.org