Plans have been unveiled to sink a decommissioned Navy destroyer off the coast of Portland, Dorset, to create an artificial reef which it is hoped will attract divers to the area.

The scheme has been proposed by Weymouth and Portland Wreck to Reef, a non-profit community group, and comes nearly five years after the former frigate, HMS Scylla, was sunk in Whitsand Bay near Plymouth as part of a similar project. Wreck to Reef has already entered discussions with Richard Norris, head of operations at the Disposal Services Authority (DSA) to acquire a ship, and it is hoped that a Type 42 destroyer which is to be decommissioned this month in Portsmouth will be made available.

Two potential locations have been identified by the group, with the first being a 525,000sq m (5.6 million sq ft) area in Balaclava Bay which, despite having a maximum depth of 18.2m (59.8ft), has relatively slow tidal streams and offers shelter from most winds. A 1 million sq m (10 million sq ft) area due east of Church Ope Cove is the second option, with varying depths of between 22m (72.1ft) and 52m (170.6ft) providing a "more diverse" dive range.

Once necessary permissions have been granted, Wreck to Reef hopes to establish a working group to manage the diving area, which will include representatives from the local councils, maritime agencies and Portland Port Authority. The group is also looking towards the South West Regional Development Agency (SWRDA) to provide the majority of funding for the project, including the acquisition of the ship, decommissioning and scuttling costs. However, the SWRDA is yet to commit to the scheme. Tony Bray, SWRDA's Dorset director, said: "We have had some initial contact with Wreck to Reef but have made absolutely no commitment to fund the project and given the current economic climate and pressure on our own budgets we do not view it as a priority.

"We have agreed to meet with them but our main focus at the moment is on existing commitments like our £40 million investment in Osprey Quay on Portland, and funding regional support for businesses to help them survive in light of the rapid economic slowdown and the credit crunch, rather than making new investments."