THE City Council is looking to borrow £2 million from other local authorities to cover a severe cash-flow problem.

The £40 million Kingsway redevelopment has been delayed while the developers, Chelverton, renegotiate the finer points of the deal - leaving the council short of funds.

They had hoped the sale would go through and net the authority £4 million but there are a number of unresolved issues with the massive city centre development, including traffic impact problems and how much of the site will be used for retail.

The listed Bridge House and Kingsway buildings are also proving troublesome.

The latest cash crisis comes at a time of severe pressure on the council's finances but deputy leader Geoff Wilson insisted he would do everything necessary to balance the books.

"Chelverton have had some problems with the traffic scheme and some of the buildings and they've not able to get their plans up and running yet," he said.

"They have assured us that they intend to develop the site and there's no question of them pulling out. They have already spent an awful lot of money on the scheme and have said they will renovate Bridge House as soon as possible as an act of goodwill. We have no option but to give them an extension to the time they have to complete the development.

"This leaves us with a cash flow problem and like many councils we're going to take advantage of a borrowing approval to ensure we're covered."

He added: "Our first 12 months have been very difficult but we've grasped the nettle and begun to streamline the authority to get it on a better footing. We can't ignore the fact that the previous administration spent £10 million of council reserves and we've been left to face the harsh reality.

"But we're doing everything we can and we're confident the budget will be under control."