By Thom Kennedy

Last updated 09:31, Friday, 10 October 2008

Sainsbury's is to stand by the stalled New Squares project where it plans to open a new supermarket.

Work has stopped on the New Squares shopping development

The chain is due to open a 55,000sq ft store on the site where work ground to a halt on Monday following a funding crisis.

Despite the project’s problems, Sainsbury’s said it will continue with its plans and will sit down with developers Lowther Manelli and Eden Council to assess the situation.

A statement released between the supermarket and developers said: “Despite the national financial situation, Lowther Manelli and Sainsbury’s do remain committed to delivering Penrith New Squares.

“The aim is to re-start the project in the New Year when alternative funding sources are in place.”

The development was halted after the National Bank of Australia withdrew funding.

Now developers are looking for corporate backing to restart construction work early next year.

Jim Lowther, whose company Lowther Manelli is behind the £79m project, said he was hopeful of securing new backing.

Speaking to The Cumberland News, he said: “The cause is the extreme and unprecedented unwinding of the financial markets in the last two months, which has undermined the economic case in the short term.

“What we need to do is put together a new funding package, underpinned by corporate and private investors and money, taking a longer term view. We are in those negotiations right now.”

Work has also been suspended on the Frenchfield site due to become home to Penrith Football Club.

That site was due to be completed within the next month, allowing the club to move out of their Southend Road ground.

This would allow work to begin on the site of the current ground.

The club will continue at the current ground for the remainder of the season, meaning its future is not in immediate jeopardy.

Mr Lowther added that with the new ground so close to completion, the Frenchfield site was the project’s first priority.

With so much uncertainty over the future of the project, which was eight years in the planning, the council has said there is a contingency plan in place should the project fall down completely.