OXFORD City Council has plugged the £4.35m funding gap in the £121m Oxford Flood Alleviation Scheme.

The authority announced this morning it will use the majority of a £6.09m grant it won from the Government's Housing Infrastructure Fund last week.

That cash was specifically intended to help bring forward the 'Osney Mead Innovation Quarter', an Oxford University plan to entirely redevelop the west Oxford industrial estate including 600 new homes for University students and staff.

The announcement brings to an end some two years of struggling by the Environment Agency, which is leading the design of the flood scheme, to plug the funding gap.

Environment Agenct project director Joanna Larmour said: "This is a huge scheme – one of the biggest the Environment Agency is working on – and when complete it will not only reduce flood risk to homes across Oxford but it will also protect vital infrastructure, enabling the city to keep moving during flooding. It will also benefit communities and wildlife in a number of ways, including improving existing public footpaths and creating new habitat for wildlife and improving biodiversity.

"Today’s fantastic news shows that working in partnership can help us get the best scheme for Oxford. We are very pleased that our partners have recognised the multiple benefits it will bring and helped us secure the funding required to progress the scheme to the next stage."

The Treasury, which gave outline approval for the scheme in November, warned that every penny of the £121m would have to be secured before it would allow work to start.

At one point the Environment Agency said that if it could not find the last £4.35m the scheme may have to be scrapped.

Agency staff and councils have spent months trying to persuade local businesses and the universities to help meet the cost but to no avail.

The city council said the £4.35m funding 'ensures that the Oxford Flood Alleviation Scheme can be built' and would also protect the 8.8 hectare Osney Mead Innovation Quarter from flooding, enabling it to be developed.

The Oxford Flood Alleviation Scheme now has received £55.3m of funding from all partners – Oxford City Council, Oxfordshire Local Enterprise Partnership, Thames Regional Flood and Coastal Committee, Oxfordshire County Council, Thames Water Utilities Ltd and the University of Oxford – and £65.7m Government funding.

Oxford City Council has pledged about £6.3m towards the scheme, including the donation of council-owned land.

The £121m funding will cover the design and construction costs and maintenance of the scheme for 10 years.

The Environment Agency will submit the planning application in March and it will take approximately three years to build.

A full business case is due to be submitted to HM Treasury later this year by the project team, while partners continue to negotiate with external companies for future investment in the scheme.

The main pillar of the flood scheme is to dig a 3.5-mile flood channel around the west of Oxford running from next to Seacourt Park and Ride on Botley Road to join the river Thames near Kennington.

Much of the channel will run along the route of the existing Seacourt Stream.

During heavy rainfall, the channel is designed to divert water away from the city centre and stop the Thames from overflowing.

The Environment Agency says it will reduce the flood risk to 1,200 homes in the city but also allow Botley Road and Abingdon Road to stay open during times of heavy rainfall.

The scheme also includes many smaller flood protection works including a bund, or earth mound, running behind the Four Pillars Hotel on Abingdon Road.