DESPITE a succession of trouble-hit developments, council chiefs claimed that Southampton is "coping magnificently" with the credit crunch as work began on the city's latest major development.

It comes justweeks after City Lofts - the luxury apartment builder tasked with building a new arts complex in Northern Above Bar - went into administration, throwing much of the scheme into doubt.

Just weeks previously homes giant Wilson Bowden admitted that it had shut down work at Admiral's Quay in Ocean Village with just three of five planned blocks of flats built.

Both were victims of the economic downturn.

There are also fears over the future development of a boarded-up plot of vacant land at 60-64 St Mary's Road, near the Charlotte Place roundabout.

Despite initial estimates that the deal would be wrapped up in a couple of months, the council is still negotiatingwith a housebuilder, understood to be Lovell, more than a year after it won an auction for the site - beating a bid from local developers to build an £80m ice rink complex there.

However, city leaders are now hailing the start of construction on a £110m development at East Park Terrace, which will include homes, offices and two hotels - including a landmark four star SAS Radisson set to become the city's highest building.

The new buildings will replace 1960s offices and the former home of an ambulance station.

Councillor Royston Smith, Cabinet member for economic development, said: "This magnificent scheme will provide the citywith fantastic leisure, residential and business facilities, and what a fantastic site this development will be for people coming into our city.

"While a global credit crunch is affecting the country, our city is coping magnificently, with huge developments such as East Park Terrace, Ikea and Watermark West Quay coming to the city."

The East Park Terrace development will be built in stages.

The first will see 223 apartments built - 54 will be affordable homes held by Challenge Housing Association, 36 for rent and 18 for shared ownership - as well as an 11- storey hotel with about 122 rooms.

The next phase of work will see the 22-storey 200-bedroom hotel with conference facilities built alongside office space.

The development also incorporates landscaped public space, and will form part of a wider regeneration strategy for the city.

Southampton City Council granted planning permission for the scheme by Imperial Property Group last year.

Delph Property Group bought the bulk of the apartments for rental on the open market earlier this summer.