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The designer of the new Shakespeare theatre in Stratford says it could be the last great public project for years

The man behind the design of the new Royal Shakespeare Theatre in Stratford-upon-Avon has predicted a long period of stagnation for architecture that will scar both the British landscape and the national economy. After the boom in the early years of the millennium, an era of paralysis lies ahead, according to Rab Bennetts.

"I am pessimistic about the way cutbacks in building will affect the country," he said. "I think the government has underestimated the impact on the economy."

Bennetts suspects that the £100m redevelopment of the RST, which is due for completion in the autumn, may prove to be the last great public project in a "golden age" of lottery funding.

"Lottery grants for this scale of work are disappearing because the private sector is no longer in a position to match the funding," he explained. "So this theatre at Stratford may well be the last of its kind. Even the planned expansion of Tate Modern has a question mark over it and other similar projects are being wound up."

The biggest blow to the profession will come from the withdrawal of funding for school improvements, Bennetts believes, but the additional freeze on new cultural centres and public spaces will stop modern Britain in its tracks.

"The loss of around 715 school projects in one hit, with lots more to come, will have a lasting impact. Although I am sure there is truth in claims there was too much bureaucracy involved, there was a lot of dilapidation and the work was needed."

After the high-profile projects that redefined the urban landscape under New Labour, such as the London Eye, Tate Modern and the redevelopment of Gateshead, Bennetts says architects fear a blight on their profession that will be followed by the collapse of many construction firms as private and government schemes are shelved.

"When we had the last deep recesssion, the building and construction industry lost half a million people and I don't think they ever came back. We are talking about a permanent loss of jobs and skills. And construction is the second biggest industry in the country, so of course it can depress the whole economy."

Bennetts, who rebuilt the Hampstead Theatre in north London and designed Brighton Library, runs an architectural practice based in London and Edinburgh with his wife and partner, Denise. In 2005 they won the contract to redesign Elisabeth Scott's 1932 theatre in Stratford, the home of the RSC. Theatre-goers are due to take their seats for the first time in the new, more intimate auditorium in November, but Bennetts fears that it will be the last such opening for several years.

"I wish there could be some kind of flywheel that could stabilise the extremes of building in times of both boom and bust. Clearly, some of the buildings that went up over the last 10 years weren't necessary and were just monuments to their creators. But although there were excesses, it will look like a golden age," he added.

Like the threatened Tate extension, a hoped-for transformation of Piece Hall in Halifax is the kind of public scheme described by Bennetts that may suffer. Last week the people of the Yorkshire town learned that plans to turn one of their most historic buildings into a £16m European-style piazza could be scaled back due to lack of funds. In March the local council was awarded £239,700 from the Heritage Lottery Fund to draw up blueprints before a further £7m was committed. Now there are fears that a promise of an extra £3m from Yorkshire Forward, the regional development agency, may not be honoured as the agency is replaced in a government shake-up.

In the 1980s, when the post-war programme of public works had well and truly finished, the only high-profile modern project to be built was Richard Rogers's London headquarters for Lloyd's of London. Private enterprise eventually signalled the future with the development of the tower at Canary Wharf. When the annual Stirling Prize for architecture was set up in 1996, the contenders on the shortlist were a modest selection of office buildings, humble house conversions and small-scale university facilities.

Money began to flow again when New Labour began to make liberal use of the key Conservative legacy: the National Lottery. The London Eye, Tate Modern, the redeveloped Royal Opera House and the covering of the Great Court of the British Museum all changed the look and the mood of the capital before private entreprise weighed in with glamorous projects such as the Swiss Re tower, popularly known as the Gherkin.

Similarly bold schemes went forward across the country – Scotland finally got its expensive new parliament building and Glasgow was given the Clyde Auditorium, known as the Armadillo.

Fifth of RIBA's annual architecture plaudits go to education projects – but now cuts will bite

In what may be the last hurrah for public buildings before government spending cuts bite, prizes for architectural quality were awarded to 17 new school and university buildings by the Royal Institute of British Architects today.

From a £27m art and design academy at Liverpool John Moores University to a multicoloured glass extension at Clapham Manor primary school, education buildings won almost a fifth of the RIBA's 93 awards in a feat that may not be repeated for a generation after the government ordered a moratorium on new plans for school buildings.

The new education secretary, Michael Gove, recently clashed with architects when he accused them of "creaming off cash" that should have been going to the frontline.

The RIBA roll of honour also reveals the damaging effect of recession on architectural opportunity: instead of the stadium, airport and museum projects of previous years, the 2010 list features more modest projects, including a bus drivers' toilet in Dagenham and a black-clad electricity sub-station on a 2012 Olympic site in east London. And, with house building falling to an 87-year low, just three housing schemes were granted awards.

Many of the country's leading designers, including Zaha Hadid, David Chipperfield and Rogers Stirk Harbour & Partners, won accolades for buildings elsewhere in the EU rather than at home. Hadid's expressionist angles and curves were reserved for Rome's museum of 21st-century art, MAXXI, while Lord Rogers, widely regarded as one of the world's leading modernists, designed a new headquarters campus for a Spanish technology company in Seville.

"The RIBA awards reflect not only the state of British architecture but also that of its economy," said Ruth Reed, the institute's president. "In the midst of the deepest recession in the awards' 45-year history, this year demonstrates that, although times might be hard for architects, there are still great buildings being built throughout the country and overseas. The RIBA awards always give an opportunity for gem-like small projects and less established practices to shine through, and this year is no exception. Far from being a size prize, the RIBA awards are for buildings that offer value to people's lives."

The memorial in Hyde Park to the victims of the 7 July 2005 bomb attacks on the London transport network, by Carmody Groarke, also won and is considered by some as a possible contender for the shortlist for the £20,000 Stirling prize for building of the year, which is drawn from the RIBA award winners.

Ellis Woodman, architecture critic at the newspaper Building Design, said that other strong Stirling prize contenders included the Nottingham contemporary arts centre, the new British embassy in Warsaw, the Neues Museum in Berlin, Christ's College school in Guildford and Hadid's MAXXI museum.

The Oregon-born architect Rick Mather won most awards, gaining four. Other winning buildings included a new home in Bristol for Wallace and Gromit's creators, Aardman Animations, and a cluster of foil-clad small-business units, which look like cybermen helmets, designed by Thomas Heatherwick, in Wales.

• Lack of private finance forces government to act
• Roads, schools and waste management to benefit

The Treasury will announce a £2bn lifeline today to rescue construction programmes for motorway widening, new schools and incinerators after British and foreign banks pulled out as backers.

The cash injection is aimed at kick-starting up to 110 major projects on a £13.5bn private finance initiative programme by putting Treasury cash alongside money from contractors with, it is hoped, some contribution from investment banks.

The extra money, to be available from next month, is the latest initiative from the government to spend more to try to lift the economy out of recession. Public bodies will have to apply to the Treasury through their government ministry for help.

Yvette Cooper, chief secretary to the Treasury, hopes the cash will breathe new life into controversial PFI schemes, in which banks and contractors build new projects and then rent them back to the state for up to 35 years. The schemes were highly profitable until the credit crunch, with banks being criticised by the National Audit Office and MPs for making too much money from the taxpayer. But since the downturn foreign banks have drawn back from investing in them, on a similar scale to their withdrawal from offering loans and mortgages to customers.

Top of the list for new investment are incinerators and waste recycling schemes, including a government contribution to a £4.4bn waste scheme for Greater Manchester. The government still hopes that some private capital will go into this scheme, which is being managed by the Bank of Ireland. Investment in waste disposal is seen as essential to help the UK avoid being heavily fined by the European Union if it misses mandatory targets to halve landfill use by 2013. Some of the schemes are so big they will take four years to build. The cost would fall on the council tax payer.

Other important schemes that could benefit are plans to widen motorways, notably the M25 around London, and build schools. The £2.4bn school building programme announced by Ed Balls, the schools secretary, has been hit by the failure of banks to invest.

Cooper said: "We need to get these important infrastructure projects moving quickly to support jobs right now. That's why government is stepping in to accelerate the process and safeguard these major projects in the face of financial market problems."

The extra money could also be used to build some of the last 10 PFI hospital projects, which have been delayed for a year because they could not get money from the banks. It will also allow a number of new courts to go ahead.

The Tories were sceptical. George Osborne, the shadow chancellor, said: "We all want to see planned projects go ahead ... But this announcement looks suspiciously like Alistair Darling is applying a sticking plaster to Labour's failed PFI model. What is really needed is a wholly new approach that involves the private sector while delivering value for money for taxpayers."

Jeremy Barker, a director with accountants KPMG, said: "Any source of new money is clearly going to help free up logjammed transactions but the idea of a government bank acting like a private funder is potentially at odds with the philosophy underlying PFI."

He warned the government not to go "back to old-style procurement and the bad old days of cost overruns and delays".

The Scottish National party was highly critical of the move yesterday. Its Treasury spokesman, Stewart Hosie, said: "Labour have bailed out the bankers, and now Alistair Darling seems set on propping up PFI projects. This humiliating bail-out is not only the clearest indication that PFI has failed but is the economics of the madhouse. Why is public money being used to prop up a system that gives such a bad return compared to traditional public procurement?"