One NorthEast - the regional development agency, part of the County Durham Economic Partnership - has awarded over £2m towards the project. This sum will compound the £200,000 from the European Regional Development Fund and £3.3m from the Heritage Lottery Fund, to enable the restoration work.

Adrian Jenkins, director of The Bowes Museum, said: "These generous awards complete the funding jigsaw required to commence the third phase of the Museum's development programme."

The work will include the creation of a new gallery, a reading room for researcher and students, a library, an education suite and upgraded museum facilities. Previous phases, which were completed in March 2007, included three new galleries and the restoration of the roof.

The work is being managed by construction firm Turner & Townsend in conjunction with Colin Williams Design - the interior architects - and Peter Pace Architects who are in charge of the roof restoration.

Stacy Hall, One NorthEast's director of communications and tourism, said: " Tourism is worth £3.5bn to North East England's economy. Last year the region saw a five per cent rise in visitors to its attractions and the investment in The Bowes Museum will continue to increase this figure." 

The work is also being financially supported by Northern Rock Foundation, the Monument Trust, Garfield Weston Foundation, The Foyle Foundation, the DCMS' Wolfson Museum and Galleries Improvement Fund, Designation Challenge fund and The Shears Foundation.

New bids will be submitted for further funding for the final phase due to commence in 2009/2010.