A new national stadium for Britain is likely to be built on the existing Wembley site, despite appeals from Birmingham and Manchester that it should be located outside London, following the revelations of how deep the financial mire surrounding the current project has become.

Government and sports officials, including the Football Association (FA) and Sport England, which distributes national lottery money, believe it would be too costly and time consuming to move the stadium to a different site, outside London. Locating it at Wembley would also mean that £120 million sterling of lottery money given to the project would not have to be returned by the FA.

The Wembley option is also winning support from home secretary Jack Straw's ministerial working group, which meets today to discuss how to salvage the project.

The government was asked to intervene after the FA said it could not be the sole financial backer for the project. The working group is made up of senior politicians such as John Prescott, the culture secretary Chris Smith and representatives from the Treasury and the Cabinet Office.

The original design for the stadium by Norman Foster is to be scrapped and replaced with a completely new one that will not include hotel and office space, as in the original plans. A new design team is to be appointed after the election.

A spokesman for Smith said: "The current design is dead in the water. It means all the plans for hotels and office space will go. The government is not in the business of building hotels and offices."

An 80,000 capacity stadium on the existing Wembley site, which would be cheaper to build, would also be closer to the original brief issued at the start of the project and would face fewer problems getting financial support from the City.

Despite the fact that cities such as Manchester and Birmingham spent most of yesterday claiming they could be alternative venues to Wembley, and politicians said they were keeping all options open, privately some of those involved in the project want it to remain in London.

The board of WNSL, the FA subsidiary set up to oversee the project, also met yesterday and said it remained committed to building the stadium at Wembley despite the financial problems.

Members of Straw's working group have hinted that if the cost of the stadium could be brought down then the government might be prepared to commit some public funds.

The working group is to appoint a special adviser today who has expertise in building stadiums. Candidates include Bob Murray, the Sunderland football chairman who was the driving force behind the club's £30 million Stadium of Light.

Ministers are also sounding out key figures behind the Cardiff Millennium Stadium, as well as Patrick Carter, who advised the government on the Commonwealth games.

The working group will also examine football's finances and try to establish how much the game should contribute towards the stadium. Talks are to be held between the FA and Straw in the coming days.

An FA statement said: "The Home Secretary has said he is keen to meet with senior FA officials as soon as possible. We have assured him we will play an active, positive role in the work of his group."