Stroud’s canal ‘missing link’ is set to be plugged this year, with contractors moving in to build a new 330m length of canal just below Dr Newton’s Way.

The £2m contract at Capels Mill has been awarded by Stroud District Council to Alun Griffiths (Contractors) Ltd of Abergavenny, a company specialising in canal and waterway work.

Building a new length of canal at this point is one of the biggest engineering challenges on the whole 37 mile Cotswold Canals restoration between Saul and Lechlade. The original canal at Capels Mill was lost when Dr Newton’s Way was built in the 1980s. The site slopes steeply and much of it is contaminated, following its use as a rubbish tip in the 1970s. A new canal channel will be built from concrete, hugging the contour of the land as closely as possible. Plans include the planting of over 1000 new trees. Plans for the site were subject to public consultation in May 2011 and were well received. The remains of the actual Capels Mill building and their riverside setting will be unaffected by the work.

"This is the canal project’s biggest contract so far," said Cllr Keith Pearson, the council’s Cabinet Member for Regeneration. "It takes restoration well beyond the old Stroudwater Navigation and into the Thames & Severn Canal. This opens up the way to Brimscombe, so it’s a really major milestone."

News that work will be starting at Capels Mill was welcomed by Carole Garfield, Chair of Stroud Chamber of Trade. "This is good news for Stroud," she said. "It brings us a big step nearer to having a working canal running through the town, although we still have the challenges of linking the canal and town together. Nevertheless, it is a huge opportunity and it is good to see big infrastructure investment, especially in the present economic climate."

In 2010, Alun Griffiths Construction carried out the restoration of Ryeford Double Locks, on time and on budget. Director Peter Evans said "The Cotswold Canals Project is exciting and we are delighted to be a continuing part of it. We take pride in our work and will make sure that we do justice to those skilled men that originally built the canal back in the 1770s."

Work is expected to begin next month and be completed early next year. To avoid disturbance to nesting birds, trees and other vegetation have already been removed by volunteers and contractors. Costs will be met by the Heritage Lottery Fund as part of its £11.9m contribution to canal restoration between Stonehouse and Brimscombe. No companies based in the Stroud District tendered for the work.

The main site access will be from Dr Newton’s Way, where there will be occasional disruption. Footpaths through the site will also be closed for extended periods; details will be published once a detailed works programme has been drawn up.