SOUTHAMPTON'S arts community is buzzing over plans to create a cultural quarter in the city, anchored by a new £16.3m centre in Guild-hall Square.

Either the Tyrrell & Green or the C & A building could be demolished for the arts centre, which would feature a gallery and two auditoriums.

The Southampton City Council plan hinges on getting a £5.5million slice of the £70million coming up in lottery funding, which is controlled by the Arts Council.

The Arts Council takes advice from its regional bodies and Southern Arts said it was right behind the plan.

A spokeswoman said: "We've been working on the whole background of this for five years - we've been pushing this along so there's no question that it will not get our backing."

"The biggest factor is that it will bring together a lot of what is happening in the city already."

The proposal has already caught the eye of the John Hansard Gallery.

Director Stephen Foster said if the plan went ahead, the gallery would relocate from Southamp-ton University.

"Southampton really needs it - it's the final piece of the jigsaw," he said. "There's WestQuay, the waterside development, these are significant things and it has the effect of making Southamp-ton a major European city and the arts quarter is an important part of that. People are now realising that culture can bring international recognition to a city. When Bilbao got the Guggenheim it put it on the world stage.

"I think Southampton will have one of the best contemporary arts centres in Britain."

The centre will also be the new home for Art Asia.

Chairman Khurshid Drabu said he looks forward to reaching a wider audience with the improved premises.

"In the way cultural diversity has not always been on top of the agenda in this part of the country, our progress has not been as rapid as we would have liked it, and that's because of resources, but Southampton City Council understand the concept of cultural diversity and inclusiveness and South-ampton will be regarded as the arts capital of the South."

But the plan does have a £10million shortfall, something acknowledged in the report to be put to council's corporate committee tomorrow.

The report states: "Sources of funds to bridge the gap might be: other public subsidy (for example SEEDA); fundraising (£1.75m) and disposing of other elements of the investment property portfolio."

However, a bigger controversy could be on the horizon.

Mr Foster said the lottery liked buildings that were bold in architecture - "If anyone gets lottery funding they have to do a building of the highest quality, that's part of the deal."

Council arts development officer Christine Rawnsley said the Peckham Library, winner of the 2000 Royal Institute of British Architects Stirling Prize, was an example to be followed but shied away from a similarly bright orange exterior.

The council does intend a modern structure though.

Its urban design strategy promises to "create a new architectural landmark".