AN ageing North Dorset hospital will not be replaced -because of the recession.

NHS chiefs have blamed the current economic climate for their decision not to rebuild the Westminster Memorial Hospital in Shaftesbury after a consultation lasting more than a year.

Paul Sly, the chief executive of NHS Dorset, said work would continue to renovate the hospital's Victorian buildings, where x-rays, physiotherapy, dentistry, and treatment for minor injuries is available.

"We understand local residents may be disappointed by this decision, but we really have no other option at the moment; there are insufficient funds to take this project forward.

'I would like to reassure people that we fully intend to continue to improve the facilities at the existing hospital," said Mr Sly.

Work on single-sex bathrooms had just been completed, said Mr Sly, who pledged to strengthen community services to deliver care closer to the homes of people in surrounding parishes.

The mayor of Shaftesbury, Cllr Lester Dibben, said people in the town would be relieved by the decision.

"The retention of a hospital in Shaftesbury was the paramount consideration. Whether it stays at the Westminster Memorial Site, or another site, we're pleased that it's here.

"The fear in the Shaftesbury area was that it would in end up in Gillingham because that is where the cheap land site is.

"There's only one road through Gillingham, where 90 per cent of roads from the surrounding parishes end up in Shaftesbury," said Cllr Dibben.

A consultation on options to replace the hospital began in April 2008. Gillingham councillor, David Milsted, said he hoped the work would not go to waste.

"An astonishing amount of work has gone into this project locally, and I hope it will be saved work. The time will come again when it can be used," said Cllr Milsted.