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"Huddersfield is still part of our global aspirations. It is rooted in our history." That's the kind of thing I like to hear, and it was trumpeted out over Castle Hill in the West Yorkshire town this week. The local partnership of architects that built the intriguing folly of 1899 is still in business after 175 years, and that's quite an achievement for architects; practices seldom last more than a generation; maybe two.

The Huddersfield Examiner reports how Abbey Hanson Rowe, as they were called initially, continued to prosper and has now become part of the Aedas practice (from the Latin Aedificare meaning to build), which, with main offices in London, New York and Hong Kong, is busy all over the world. Not least in Huddersfield. The context of the Castle Hill declaration, given by Aedas director Robert Grayson, is that the firm still has 90 staff working in Huddersfield, with more than 80 of them living in Kirklees, the local authority area.

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I'm not surprised by that. Anyone who knows the Pennine valleys going up from Huddersfield – Summer Wine country – would die to live there, should such a paradox be practicable. Which makes me wonder about the psychology of some BBC mandarins who seem to be making a dog's breakfast of the great relocation of major departments to Salford Quays, whose importance to us in the north cannot be overstated.

I was aghast to read on our own website about the recently appointed head of HR resigning rather than moving up here. So much so that I emailed the BBC to ask what was going on. Here's the reply:

"All our executives will be living and working in the north from day one, when our new base in Salford Quays opens next year. All BBC staff who are relocating and who own a home have the option to rent initially if they have specific circumstances that require them to keep their family home in the south-east (eg if their children will be mid-way through their A-levels), for up to two years before relocating their family home to the north. A number of more junior staff have also chosen this option and the rules are exactly the same for all.

"Peter Salmon, director of BBC North, will be living and working in Salford from day one, and he will relocate his family once his children have finished their exams, which is the commonsense thing to do. Although he would be entitled to relocation costs at that time, he has voluntarily decided to relocate at his own expense, not licence fee payers'.

"In addition, Adrian Van Klaveren, Controller of 5 Live and Richard Deverell, chief operating officer, will also be renting initially for family reasons. Others such as Joe Godwin, director of BBC Children's and Saul Nasse, controller of BBC Learning, will be moving their families from the beginning.

"Whilst executives are committed to relocating their families in the longer term, our relocation policy is designed to allow some flexibility in recognition of the impact that relocations like this can have on family life."

Keep up the pressure everyone. Of course there are family issues around relocation; but talk of 'two years' is alarming when the psychology of this move, and the commitment to real devolution of power and influence, is so crucial.

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Plenty of other new arrivals in the north clearly agree. The Southport Visiter reports that Liverpool has done even better for hotel bookings this year than in 2008, when it was European Capital of Culture – and did a famously good job of it too. Bookings in July broke all records – nearly 95,000 for events such as the Summer Pops, with Rod Stewart on the bill, and the women's open golf championship at Royal Birkdale. The city's total of hotel rooms has risen in response, from 2,650 four years ago to 4,095 now, with three planning applications for new hotels currently before the city council. They would add another 341.

It's a northern thing more widely. I went to York last night to a do at the new Cedar Court Grand hotel, which has spent £25m converting the old North Eastern railway HQ (think county hall with a medieval wall next door). It is already full every weekend, and has up to 60% occupancy during the week; and that's in a city where hotels are everywhere. Please keep them coming.

Incidentally, the subtly differently named Southport Visitor website intrigued me with what appeared to be a candidate for Most Locally Local Story of the Year: "Free parking space on Albert Road". But if you click here you'll see the enjoyable point.

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It's always good to spot local dialect in local papers, even if those of us who don't live there have to reach for the dictionary or Wikipedia. Take the case of Hayley Revell, who writes the Running with Revell column in North Tyneside's News Guardian. She isn't running just now, because of a spelk.

That's Geordie for a splinter, which in Hayley's case was more exotic than usual. She went on a boat trip while on holiday in Turkey, dived in and hit her foot on a rock. When it was still hurting on her return to Newcastle, she went to the doctor, she says, "with what I thought was a posh spelk".

The canny doctor recognised the scrap as coral – impressively for Tyneside, where you don't see much of the stuff. So Hayley's off for an anaesthetic and removal of the pretty but razor-sharp object – in time, she hopes, for her charity go at the Great North Run on 19 September.

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Exotic news now from Louth, where the local Leader has reported monkey sightings two weeks running. Both were made by local police constables, starting with neighbourhood response officer Paul French, who had to brake sharply at South Cockerington when the small beast scampered out in front of his car.

"I thought it was a squirrel at first," he told the Leader. "It was a similar size, but was dark brown in colour and had a long, straight, upright tail. It paused for a moment standing on its hind legs, looked at me, then scampered off over the hedge."

Curiously, I saw what I thought was a dead monkey on the A64 road from Leeds to the hotel do in York (a road to avoid until after the Leeds Festival, which sees colourful and genial but chaotic traffic in the run-up to the bank holiday weekend). So I spent quite a lot of time on the phone to Lincolnshire police, checking out other possible sightings.

There haven't been any, but the police pointed me in the direction of BBC Lincolnshire's website, which has certainly gone the extra mile on the story. Its reporters checked the local East Lindsey district council's records of monkey licences held under the Dangerous Wild Animals Act, found there was only one, and established that its monkey is where it should be – at home.

The mystery therefore continues, as does the identity of my roadside corpse. Further news on either welcome.

Martin Wainwright recommends

Bank holiday offers innumerable attractions in the north, but I'll plump for the chance to be served cream teas all day. This is at Fountains Abbey, the world heritage site in North Yorkshire, which holds a Georgian Day on Sunday, with music and dancing in the lovely water gardens.

In a week that sees the uninviting prospect of an English Defence League demonstration in Bradford, I'd also warmly recommend the Community Celebration organised in response. It's called Be Bradford – Peaceful Together and takes place in Infirmary Fields on Westgate from midday to 4pm. Plus an excellent book by an almost-contestant in Big Brother from that great city, Mahmud Khan. Called The Logic of Half a Moustache, it has the wit, fun and friendliness so under-reported in pieces about Bradford's Muslim community, and you can get it from mahmudkhan.com

• This article was amended on 27 August 2010. The original named an Aedas director as Richard Grayson, and said that the firm was American-led. This has been corrected.

Lack of planning has given us urban squalor, where, with a bit of regulation, dense populations could live in comfort

England is now the second most crowded country in the European Union, after Malta. It has, for the first time, inched past the Netherlands, with 402.1 people per square kilometre, compared with the Dutch 398.5. This statistic coincides with a rise in net migration, partly caused by a decline in outward emigration. Some have already been quick to link the two.

Overcrowding, class, immigration and race have long been linked in certain quarters. From the apocalyptic 18th century predictions of Malthus through the cannibal megalopolis of the film Soylent Green to the "demographic threat" in Israel-Palestine, the prospect of a teeming mass of inferior folk causing mayhem and starvation, or simply outnumbering "us", has been a persistent obsession.

But if the EU report is given more than a cursory glance, it is easily seen that the apparently alarming statistic is actually about population density, not immigration, "over" crowding or "over" population – nor even the population density of the UK. England might have a density of 402.1 per square km, but the UK as a whole is well below the Netherlands and Belgium at 256.3, roughly the same level as Germany. Scotland and Wales are far below either, with Scotland's level of 70.9 placing it lower than Slovenia, Bulgaria, Romania. So what this is really about is concentration of population in very particular places and underpopulation elsewhere. A response to that doesn't necessitate draconian immigration caps, but rather something terribly unfashionable – town planning.

Densely populated areas are not necessarily slums. Among the densest places in the UK are Mayfair and Pimlico, or the west ends of Glasgow and Edinburgh. With their expensive stucco squares and sandstone tenements, these places are by no means dystopian. Given their extreme desirability, an extremely high population density is clearly not so alarming.

Architects and planners, disenfranchised by the suburban non-plan of Thatcherism, spent the 80s and 90s agitating for tightly packed housing, the use of urban brownfield sites, compact cities, piazzas and public transport – all attempts to manage and make urban density comfortable. Under New Labour, this generation – architects like Richard Rogers, planners like Ricky Burdett – had the chance to implement these ideas.

You can see the results all over the UK, wherever "mixed use" blocks of flats fill former industrial land, in the skylines of Leeds and Manchester, in east London. Usually, the results entailed four- to 12-storey flats, built around squares, with mooted shops and facilities in the ground floor. An inner-city housing boom started to match its suburban precursor.

In reality, the shops and nurseries became empty units or estate agents, the squares were inept and windswept, and speculative developers crammed as many tiny flats into their plots as possible. In Stratford you can see the grimmest results – aesthetically stunted, architecturally bumptious towers crowding round wasteland. Does this invalidate the idea? Should we, as some Tories suggest in their screeds against the ludicrous myth of "garden grabbing", celebrate the end of the attempted "urban renaissance" and return to the pseudo-rural suburban sprawl of the 80s, and the depopulation and desuetude of our cities?

Or rather, should we acknowledge that the problem with New Labour, and Rogers and Burdett was that they didn't plan enough? Rather than being held to strict standards, developers were given carte blanche; instead of council housing easing the overcrowding of the poor, a percentage of allegedly affordable housing was sold in each block of terracotta-clad yuppiedromes. Meanness – "value engineering" as it is euphemistically known – was what made the New Labour landscape so grim, not height, planning or modernity, and certainly not overcrowding.

City takes out legal action over ownership of Jacob Wrey Mould's landmark designs found in a skip 50 years ago

At some point in the 1950s a craftsman called Buckley was working on a site in lower Manhattan when he came across a stash of papers dumped in a skip. They were a set of architectural drawings in watercolours of plans for city parks including details of fountains, clocks, terraces and other structures.

What probably caught Buckley's eye was the stately nature of the designs and their elaborate colouring. Recognising their innate value, he took a pile of more than 100 of the drawings home and filed them away for safe keeping.

More than 50 years later they have become the subject of a $1m (£640,000) lawsuit lodged at the New York supreme court. The legal action was brought by the city's authorities against the late craftsman's son, Sam Buckley, and Christie's, the auctioneers through whom he tried to sell the drawings.

They were the work of Jacob Wrey Mould, a British architect who came to New York in 1853 to design a Unitarian church in Fourth Avenue and 20th Street. Though the building has long been pulled down, in its day it was quite a sensation with its striped facade of red and cream stone earning it the nickname Church of the Holy Zebra.

Mould, an irascible man who was not much liked but greatly admired, went on to collaborate with Calvert Vaux, co-designer of Central Park. Together they planned the original buildings of the American Museum of Natural History and the Metropolitan Museum of Art, while Mould also had a large hand in Belvedere Castle and the carvings of the Bethesda Terrace, both in Central Park. Later, he was seminal in the creation of other quintessential New York features such as Morningside and Riverside Parks.

Most of the drawings were signed by Mould. They display his love of vibrant colours as a student of the designer and polychrome theorist Owen Jones with whom he designed a room in Buckingham Palace. They include plans for structures that were built, such as Bethesda Fountain, as well as ones that were not – a set of street lamps for Park Avenue, for instance.

Every one was stamped with the badge of the New York Parks Department, for whom Mould worked from 1857 to shortly before his death in 1886.

When Christie's was commissioned by the younger Buckley to sell 86 of the 127 drawings in his late father's possession, the auction house contacted the city authorities for help with valuing the works and to ask whether New York wanted the first chance to buy them.

But the city saw an invaluable historic collection that should never have left its public ownership.

"They are the kind of thing we would never throw away, but for whatever reason they were erroneously discarded or lost," said Gerald Singleton, the lawyer representing the city. "Once we looked at them we realised that the city remains the owner of these drawings."

It has persuaded the New York court to put a preliminary restraining order that prevents Buckley or Christie's from selling any of the drawings.

In return, the city has promised to back off from its legal threats and to attempt to reach a settlement.

"We're confident this will end amicably," Singleton said.

If New York regains the drawings, it has pledged to use them when renovating historic parts of the city.

Lucille Gordon, Mould's biographer, said the documents were also hugely important in the understanding of the architect himself. "He is a piece of our history – his work is scattered all over New York state. Yet so few papers of any kind have been left behind, and any scrap that Mould touched has a value."

Jacob Wrey Mould

Born 1825 in Bloomsbury in London, and educated at King's College School.

Studied under Owen Jones, the so-called master of polychromy, travelling to the Alhambra in Spain.

Took part in the building of Dorchester House on Park Lane and in the Great Exhibition in London in 1851, moving to New York soon afterwards.

Started work with the city's park department in 1857, rising by 1870 to be its architect-in-chief.

Apart from a five-year stint in Lima in Peru from 1874, he spent most of his later life working for the New York parks.

Also renowned as a distinguished pianist and organist.

The 42-storey building in Elephant & Castle was nominated for its 'plain visual grotesqueness' and 'Philishave stylings'

It was hailed a breakthrough in urban wind power: a 42-storey tower with built-in turbines to deliver 8% of its electricity needs. But today the Strata tower in south London found itself becalmed when it was named Britain's ugliest new building, pipping a rival that the judges said resembled a giant pair of buttocks and a bus station that looked like a jelly mould.

Justin Black, the director of the developer Brookfield had already admitted: "It's what I term Marmite architecture – you either love it or you hate it." And sure enough the judges of the Carbuncle Cup, architecture's least sought after prize, opted for the latter.

"Decked out with Philishave stylings, this is a building that appears to be auditioning for a supporting role in a James Bond title sequence," said Ellis Woodman of Building Design, the trade newspaper which organised the prize.

The building was nominated by The Georgian Group for its "plain visual grotesqueness". Adam Jones, another nominator, said: "I used to live in south London and moved partly because — and I'm not joking — the Strata tower made me feel ill and I had to see it every day."

The dubious honour, now in its fifth year, is intended as an antidote to the Royal Institute of British Architect's Stirling Prize for the best building and has attracted growing levels of interest. Design critic Stephen Bayley said it "attracts a far higher level of intelligent participation than the Stirling prize".

Thirty-one buildings were nominated by readers "united in their often poetic expressions of outrage", said Woodman. The shortlisted Cube office development in Birmingham was described by its nominator as like "a lumpy beige ornament your father buys your mother for her birthday because he thinks it's classy, whereas she can see it for the tat it is".

For the winner, there was the difficult question of how to react. Robert Torday, the marketing director of the apparently unamused architects of the scheme, BFLS, declined to comment.

And not everyone is sure the award is a good thing.

"Labelling one architect with having produced the worst building of the year without mention of the client, developer or contractor means giving the architect a massive kicking when they are very rarely the sole author of the project," said Charles Holland, director of FAT Architecture. "Nothing wrong with robust criticism, but laughing at other people's mistakes is never an edifying spectacle."

The mayor's deal has smothered London's public spaces with what may be the largest piece of corporate branding in existence

London's long-awaited cycle-hire scheme is launched this week. While there's no doubt it's a valuable addition to the capital's public transport options, it strikes yet another blow to the idea of London as a dignified city. First of all, there's the name. Paris has the Velib, Montreal has the Bixi; what does London get? Barclays Cycle Hire. Clearly the good people at Barclays marketing thought long and hard about that one.

Maybe it's not worth getting too wound up about the name – selling the rights to popular institutions is unlikely to make anyone who watches, say, the Barclays Premier League or the Npower Championship even blink. What is new, however, is the prospect of more than a hundred kilometres of the capital's road surface being branded with corporate livery. The city's new dedicated cycle lanes – two of which recently opened, with another ten to come before the Olympics – are called "Barclays Cycle Superhighways" and painted Barclays blue.

London can now claim the dubious honour of hosting what is surely the largest piece of corporate branding in existence. It's not just the scale, the mind-blowing square footage, that is shocking about this – it's the principle. We're not talking about some supersized billboard here: we're talking about the mayor selling off the very road beneath our wheels – one of the few parts of a city that counts indisputably as public space. Whether they realise it or not, whether or not they even care, from now on thousands of cyclists are doomed to commute on a giant Barclays ad.

The sponsorship deal, worth £25m, has been presented as a coup for Boris Johnson. It has enabled him to recover some of the £140m Transport for London spent on the cycle-hire scheme and has even been presented as "payback" for the mayor's support of the banks during the credit crunch. Surely, however, £25m is a small price to pay for such an invasive piece of branding? If a city of the global stature of London can't afford to provide rental bikes without turning its urban fabric into a massive endorsement, we're in trouble.

There is something, too, in the gibes suggesting this is not just Barclays blue but Tory blue. Neither New Labour nor former mayor Ken Livingstone did anything to prevent the growing privatisation of the city, but it is hard to imagine Livingstone selling off a chunk of the public realm in such brazen fashion. Johnson seemingly lacks any sensitivity to the ethical or aesthetic side-effects of his deal-making – this is, after all, the man who condemned the Stratford Olympics site to a hideous 115m-high sculpture – precisely the kind of vainglorious ego trip the Olympics can do without – based on a 45-second chat with Britain's richest man in the cloakroom at Davos. We must be careful not to assume a loss of innocence; private ownership and interests have held sway in this city for centuries, and often cooperation between private and public bodies is the best way to meet the city's needs. However, the public realm that the Victorians handed over to municipal authorities to manage in the public good – including streets and pavements, squares, and infrastructure such as transport and sewage networks – has been under steady assault since the privatisation of the Thatcher years.

A decade ago, Naomi Klein argued in her book No Logo that we had reached a point where it seemed nothing could happen anymore without a corporate sponsor. The inevitable upshot of their growing social power was that brands wanted an expanded visual presence. T-shirt logos and media advertisements were no longer enough: branding had to be a fully immersive experience. As the superhighways prove, there is no amount of space a brand will not happily fill, with public bodies all too willing to hand it over. TfL is becoming ever more imaginative about the bits of Tube stations it will sell off to advertisers – including, now, the space between escalators and the gates of the exit barriers. Every year the Regent Street Christmas lights, once a public gesture organised by the Regent Street Association, turn a major thoroughfare into a 3D advert for some fashion label or blockbuster movie.

Increasingly entire pieces of London have become brands in their own right, a process that began in the 1980s with the privately owned Canary Wharf development. Since then, so-called "business improvement districts" have been popping up all over the capital under the banner of regeneration: Broadgate in the City, Paddington Basin, Kings Cross Central, the new Spitalfields Market, the More London development near Tower Bridge. It's a national phenomenon, too, exemplified by "malls without walls" such as Liverpool ONE or Brindleyplace in Birmingham. They might look like other parts of the city, but they are very different. Stroll through Broadgate and you'll notice the logo of developer British Land studding the pavements. These are privately owned developments, policed by private security guards who can throw you out for the slightest misdemeanour or – if you happen to be sleeping rough, say – simply for disrupting the projection of affluence. In the case of More London – a series of sterile glass blocks set amid some rather uptight landscaping on the South Bank – the very name is a deliberate deception. The developers are trying to claim this is just an ordinary piece of the city. Don't believe it.

Anyone who wants to find out more about the insidious privatisation of British cities should read Anna Minton's latest book, Ground Control. The point is that we are in danger or running out of unbranded space. Though it may seem innocuous, the branding of cycle lanes sets an all-too-exploitable precedent. As citizens we have a communal birthright, which includes the public realm. Our representatives are supposed to protect that – not sell it off to corporations who are neither responsible nor accountable for the spaces of which they claim symbolic ownership. Politicians seem only too ready to turn our cities into horizontal billboards. If we're not vigilant, the urban landscape is going to become a brandscape.

The Gateshead car park is being demolished this week. It's a tragedy, and not just for its architect

Owen Luder, twice president of the Royal Institute of British Architects, is Britain's unluckiest architect. In the 60s his firm designed several once-celebrated, subsequently reviled Brutalist buildings – all now either demolished, defaced or derelict.

The latest casualty is Trinity Square in Gateshead, a combined car park and shopping centre most famous for its malevolent, melodramatic presence in Mike Hodges' Get Carter. It's one of a series of commissions that bankrupted their developer, E Alec Colman Investments – along with the (mutilated, clad in white plastic) Eros House in Catford and the (demolished, replaced by a surface car park) Tricorn Centre in Portsmouth.

Though Luder's name was on the contracts and blueprints, the lead designer was Rodney Gordon, a former social architect with the London county council seduced into shopping centres. Trinity Square promised the realisation of his dreams – a metropolis architecture of dramatic skylines, multiple levels and striking forms, on a parsimonious budget. He died last year, entirely unrepentant.

And why should he have been? These are – or rather, were – wrenchingly powerful, physical buildings, in a tradition of dark, looming, twisted architecture that stretches from Newcastle Cathedral to John Vanbrugh. Unfortunately, we have collectively decided that architecture must be either Heritage – only Baroque is allowed to be bulging and overwhelming, only Gothic can be freakish and discordant – or Regeneration, in which case all must be glassy, shiny and colourful. Luder and Gordon's generation were too modern for the former, not patronising enough for the latter.

Luder didn't descend from Hampstead to foist his gigantic concrete buildings on the benighted proletariat, but from the Old Kent Road. "Growing up as I did in rented rooms in tightly built Victorian terrace houses with no inside loo," he said, "I went along with Le Corbusier's vision of beautifully appointed multistorey houses set in big landscaped open spaces." Yet Eros House, the Tricorn and Trinity Square were cranky, strange things, doomed to commercial failure because of their architectural caprices. The Tricorn never had enough retail space to entice an "anchor", was not sufficiently freeze-dried and air-conditioned. Proles for Modernism, a mysterious south-coast group who picketed the Tricorn's redevelopers, praised it for exactly this reason.

The Tricorn's demolition inspired protests, artworks and graffiti ("WARNING – THIS BUILDING MAY PROVOKE INTEREST"). As if to neuter this, Gateshead council has sponsored both Trinity Square's demolition and its commemoration in various art events.

When he was Riba president, Luder famously hailed Richard Rogers' Lloyd's building – essentially a more expensive Tricorn in steel – as "sod you" architecture. But at the same time, he is rare in architectural circles for actually trying to explain his buildings – when Trinity Square popped up on Channel 4's Zhdanovite Demolition, Luder managed to sway some of its haters.

Trinity Square failed to be sufficiently boring. That's not the case with its mooted replacement – a Tesco store with student flats on top, clad in as many materials as possible so as not to offend, concrete-framed but avoiding the dreaded faux pas of showing the material. Rodney Gordon claimed "architecture should appeal to the emotions. It should give you that feeling from your balls to your throat". With this demolition, we're exchanging architecture as a physical experience for buildings as a mute, grinning, lobotomised accompaniment to consumerism. We should lament it, not cheer it on.

London's Strata Tower and Robert Burns memorial in Kilmarnock among six buildings in running for dubious honour

Six buildings have been chosen for an award that highlights the worst examples of architecture in the UK. The Carbuncle Cup, run by Building Design, aims to draw attention to buildings constructed in the last 12 months that most offend the aesthetic sensibilities of passersby.

Over 30 suggestions were received, but the list was whittled down to six and published to coincide with today's announcement of nominees for the 2010 Stirling Prize for architecture.

Two London buildings feature in the shortlist, the first of which is Strata Tower in Elephant and Castle, the first skyscraper to have wind turbines built into its design. The building's design has divided critics and locals, earned the nickname the Electric Razor, and was recently described by the Guardian critic Jonathan Glancey as a "sleek silver sentinel".

The Georgian Group – which campaigns for Georgian-inspired architecture – described London's tallest residential building, at 147 metres, as "pure visual grotesqueness" when it submitted it for consideration.

The second building nominated in the capital was the Bézier Apartments, near Old Street, which was accused of being shaped like a bum. Birmingham's The Cube, a 23-floor building with a glass-panelled roof, was put forward because of its "clunky windows", "inelegant vents" and gold colour, which was meant as a nod to its location in the city's jewellery quarter.

The memorial centre for the Scottish poet Robert Burns in Kilmarnock, the St Anne's Square development in Belfast and the Haymarket Hub in Newcastle also made the list.

Last year the prize went to Liverpool Ferry Terminal. Its ugliness was thought to be award winning because it was argued that it blighted a world heritage site.

The Carbuncle Cup judge Ellis Woodman, deputy editor of Building Design magazine, said: "I would like to think that this might be a good opportunity to reconsider what was built in the in the last building boom.

"These buildings could have been so much better if there had been better levels of consultation in the planning process."

The six buildings on the shortlist will be considered by a panel of expert judges in consultation with architects and local residents.

The winner of the Carbuncle Cup will be announced on August 27.

The prize takes its name from a 1984 speech by Prince Charles, well known for his support for traditional architecture, in which he described a proposed extension to the National Gallery as a "monstrous carbuncle".

The British-Iraqi designer was nominated for her museum of 21st century art in Rome

Zaha Hadid, the Iraq-born British architect whose avant garde designs have struggled to win acceptance in the UK, was last night tipped as the favourite to win the country's top architecture award for a sinuous museum of 21st century art in Rome that the Royal Institute of British Architects regards as her best building yet.

The designer of the €150m MAXXI museum will vie for the Stirling Prize with a €200m reworking of the Neues Museum in Berlin, by David Chipperfield, another British architect who has struggled to win major commissions in his home country. Two schools, a project to double the size of the Ashmolean museum in Oxford and a home and office development in east London make up the remainder of the shortlist for the £20,000 prize which is awarded to the architect of the best new European building built or designed in the UK.

The bookmaker William Hill has Hadid as evens favourite, followed by Rick Mather at 5/1 for the £62m Ashmolean project and Chipperfield at 11/2.

Hadid, 59, is widely recognised as one of the world's leading architects, but is yet to complete a major building in the UK. Her first is set to be the London 2012 Olympic swimming pool and diving centre.

The Stirling shortlist also highlights the quality of school buildings completed prior to the deep cuts to the education budget. Architects last night seized on the naming of two schools for the first time in the award's 15-year history as evidence the government should continue to recognise the value of good design.

The £2.5m Clapham Manor primary school in south London designed by the firm of De Rijke Marsh Morgan and a £14.4m addition to Christ's College school in Guildford by DSDHA will challenge the more expensive arts projects when the prize is announced in October. The move comes after Michael Gove, the education secretary, announced the scrapping of the £55bn Building Schools for the Future (BSF) programme.

"They represent what all schools should be: light, well-laid-out and well-equipped environments in which all students can flourish," said Ruth Reed, president of the RIBA which runs the award. "Investment in well designed schools demonstrates to teachers and pupils how much they are valued and has measurable impact – attendance and results rise; truancy and bullying fall. With the programme to improve our extremely poor school estate now much reduced it could be some time before we see such exemplar school buildings on the Stirling shortlist again."

"If you engage good architects you get social value and community value that goes beyond the bottom line and has a more persistent legacy," added Deborah Saunt, a partner in DSDHA. "This is not about cost. Our school came in at less per square metre – £1,960 – than a typical school under the BSF programme, which cost around £2,400 per square metre."

Neither school on the shortlist was designed under the BSF initiative, which aimed to rebuild or refurbish most of the nation's secondary schools. Saunt added that BSF's "industrial production of schools is not something that has proven to produce quality yet".

"There have been a lot of commercial architecture practices churning out schools and not giving them the attention they deserve," she said. The smallest project on the shortlist is a £1.6m home and office building in Shoreditch, east London, designed by Theis and Khan Architects.

Elephant and Castle's Strata has dramatically changed the south London skyline – and the integrated turbines are a world first

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.