TWO of the UK's biggest banks are squaring up in a battle for the former Fountain Brewery site.

Earlier this month, HBoS announced it had entered into "exclusive" discussions with Scottish & Newcastle to buy part of the Fountainbridge site for offices for 6000 staff.

But a rival consortium of three firms, including Royal Bank of Scotland, said today it had already been named by S&N as "preferred bidder".

The consortium, known as Springside, is seeking clarification over the current status of the valuable site.

Springside has already bought up the former S&N bottling and distribution plant across the road, and is currently building the first phase of new flats in a new "urban village".

The next stage involved purchasing the main brewery site, for which it was the preferred bidder before HBoS made its interest public.

A source close to the Springside consortium said today "a lot of money, time and energy" has been spent on its plans for building homes, shops and offices on the site. It also wants to create a £9 million, 650-space underground car park and a pedestrian-friendly "town centre" on either side of the main road.

A spokesman for the consortium, which comprises RBS, AMA Homes and property developer Grosvenor, said: "We are continuing discussions with Scottish & Newcastle and will be seeking clarification on the current status of the site."

However, it is understood that the preferred bidder agreement between Springside and S&N was not legally binding.

And the recent interest from HBoS, which wants to bring together its 16 existing city offices on one campus but retain its global headquarters on The Mound, has put the plans in doubt.

Mark Elliot, a spokesman for HBoS, said: "We are still in this period of negotiation with Scottish & Newcastle.

"We are not sure how long that period will last but they (S&N) won't talk to anyone else about the site."

Edinburgh city council also wants to hold talks with HBoS about its proposals.

The city's local plan states developers in Fountainbridge would be expected to provide homes, offices, small business units and a new shopping centre, as well as creating new public space and reserving a possible site for a new high school building to replace Boroughmuir.

Councillor Jim Lowrie, the city's planning convener, said: "We will be encouraging HBoS to enter into early discussions with the council as planning authority and the local community over their plans for the site.

"Any applications then received will be considered by the committee as part of the usual planning process."

A spokesman for S&N said: "We are not going to comment on negotiations. We are legally obliged to seek the best deal for our shareholders."

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