A £23.4million project to connect Stroud and Stonehouse to the nation’s inland waterway network has been given a significant vote of confidence by the Heritage Lottery Fund (HLF).

Stroud District Council and Cotswold Canals Trust have received crucial initial support from the HLF which paves the way for the restoration of the derelict canal between Stonehouse and Saul junction.

The organisation picked Stroudwater Navigation Connected as one of just four projects across the country for development funding and the £842,000 announced today will make sure everything is in place before applying for a further £9million of HLF money to allow the whole project to go ahead.

The stretch between Stroud and Stonehouse is almost restored and bringing the remaining four miles back in to use will link it to the Gloucester & Sharpness Canal and the rest of the country.

It is expected to bring huge tourism benefits, create 30 hectares of biodiverse habitat and canal towpath, conserve and digitise archive material charting the canal’s history, and attract more than £100million-worth of new private investment within five years of the end of the project.

“That we have secured development funding is absolutely brilliant news,” said Stroud District Council leader Doina Cornell. “We knew that the bid was very strong but this is a huge relief and it means that working with partners, we can drive the project on and look forward to making Stroud and Stonehouse canal towns once again.”

Cotswold Canals Trust chairman Jim White said: “The Stroud Valleys will become a new, must go to, destination on the national canal network, bringing growth to local businesses through tourism, by increasing the canal and towpath use for recreation.

“It will also bring major benefits to wildlife and the biodiversity of the area.”

David Drew, Labour MP for the Stroud constituency, welcomed the announcement that the National Lottery will support the Stroudwater Navigation Connected project.

“I’m delighted that the National Lottery has recognised the value of redeveloping the Stroudwater canal’s ‘missing link'," he said.

"Connecting the canal to the national waterway network has been a long held vision, will bring economic and social benefits to the whole district and I’m pleased it is a step closer.

"Congratulations to Stroud District Council and Cotswold Canals Trust for getting us to this point and putting together a strong and successful bid.”