Plans to convert the former Oxford Prison site into a hotel are facing a 3 million pound shortfall in funding.

The 16m scheme by developers, the Osborne Group, will create an 87-room hotel in the main prison building in New Road.

But Oxfordshire County Council bosses say that to ensure the plans are "commercially viable", a grant of 3m is needed from the South East England Development Agency to carry out work on listed buildings. The grant application needs to be sent off by the end of this month.

The county council owns the land and is asking city councillors, who will decide the planning application, to help by writing two letters backing the grant request.

The city planning committee, which meets on Wednesday, is being warned by officers that it might not be appropriate to send the letters before the planning application has been decided.

In a report, officers said they would normally strongly advise against issuing letters of this kind because it could be seen to pre-judge the planning issue, before the public's views are considered.

But they think in this case, an exception should be made.

Their report said: "If the scheme is acceptable in planning terms and it was to fail because the funding did not materialise, it could lead to an inferior scheme coming forward which did not achieve the important aims of opening up the historic remains to the public."

Original plans to convert the old prison have also been amended to include demolition of two Grade II listed buildings. Oxford's Archaeological Unit is carrying out a study to see if there is anything of value in the Treadwheel Building and a former laundry behind the governor's office.

Last year, the Oxford Civic Society raised a 3,500-name petition which called for the site to be managed by a trust, rather than one developer.

Spokesman Tony Joyce said: "The snag is that there is a time limit on the Seeda grant."