A BUILDING described as the ugliest in Scotland is to be bulldozed and replaced by what develops hope will be the architectural centrepiece of a new cultural and shopping quarter in the capital.

The delayed £850m revamp of the St James Centre at the east end of Princes Street in Edinburgh is said to be back on track after a £61 million funding boost from the city council and the Scottish Government.

The backers said the taxpayer input will "unlock the development" for shops, offices, a five-star hotel, a four-star hotel, an apart-hotel, a digital theatre, restaurants and flats.

New skills academies for retail, hospitality and construction trainees will also help provide extra support for people seeking employment, such as school leavers.

It is estimated that the revamp of the St James Quarter will support 2300 permanent jobs and benefit the economy £25m annually.

The plans include a hi-tech cooling, heat and power centre, electric car-charging points, extensive facilities for cyclists, photovoltaic panels, solar tubes and a city car club.

Martin Perry, of TIAA Henderson Real Estate (THRE), which owns the site, said he expected the project to be a global success. He said: "Our aspirations for the St James Quarter have been well known for some time, and to have secured this funding support is a key milestone for this exciting project, demonstrating confidence in Edinburgh as a leading European city.

"We have worked very closely with the city council and the Scottish Government to realise this vision and we appreciate their support and assistance.

"This scale of investment is unprecedented in central Edinburgh and will transform the city's retail offer, putting it on the international 'map' of major shopping destinations."

THRE bought the building in 2006 for £184m, and had intended for the development to be completed by 2015; however, delays blamed on the economic downturn mean that even the demolition of the unloved building is yet to begin.

Deputy First Minister Nicola Sturgeon said the plan will "transform this area of the capital". She added: "This has only been possible due to an innovative funding model, which will see the Scottish Government work in partnership with City of Edinburgh Council and private developers, THRE.

"This Government is determined to invest in Scotland's infrastructure, both to stimulate growth in the short term and lay the foundations for long-term success."

The existing St James Centre will continue to trade until construction work starts.

The site's regeneration, the designers said, will create a high-quality retail and leisure site boasting world-class architecture.

Andrew Burns, leader of City of Edinburgh Council, said: "The project will create significant overall growth to the economy; thousands of new jobs for Edinburgh; and raise city competitiveness with other international capital cities."

Planning permission was secured for the project in 2009. Work is expected to start in 2015.