Conservation groups are split over plans to redevelop the heart of Birmingham's Jewellery Quarter.
English Heritage has expressed serious concern about a proposal to build apartments on a site occupied by A E Harris, one of the city's oldest metal-bashing firms.
The move is a breach of city council planning policy which seeks to preserve the industrial heritage of the Jewellery Quarter's "golden triangle" by severely restricting housing development, according to English Heritage.
The organisation has been joined by The Jewellery Quarter Association, which described drawings of the apartments as "reminiscent of the Hockley slums which the city cleared 60 years ago".
Supporting A E Harris, is the Birmingham Civic Society, which has registered its strong support for the scheme.
Initial plans by A E Harris to turn the firm's Northwood Street site into a mixed-use development including flats, 5,000 sqm of offices and 1,725 sqm of shops were rejected by the council in July. Talks between the company and planning officers aimed at reaching a compromise are continuing.
A E Harris has warned that its commercial survival depends on being able to sell the site for redevelopment and relocate the business outside of the city centre.
English Heritage and the Jewellery Quarter Association fear that by approving a substantial amount of housing on the site the council would signal the start of a rush by developers to build on nearby redundant industrial land.
Jewellery Quarter spokeswoman Marie Haddleton claimed approval of the scheme would "signal the end of the Jewellery Quarter."
She added: "It is just the loophole that the developers have been waiting for and new applications will flood in. Applications for residential in the Industrial Middle and Golden Triangle previously turned down will be appealed against, which will cost the council a fortune to defend."
English Heritage spokesman Michael Taylor, in a letter to the council planning department, warned: "The development represents a clear breach of policy 2.2 of the Jewellery Quarter Management Plan. We have seen no evidence to dissuade us from our consistent support for that policy.
"If housing is approved in any form it is bound to increase hopes of further breaches of the policy and put further pressure on land values in the Industrial Middle and Golden Triangle localities."
Mr Taylor said English Heritage wanted to work with the council over the A E Harris application because the issue was so significant.
Birmingham Civic Society believes the council can approve the application, if the number of apartments proposed is reduced.
Stephen Hartland, chairman of the Civic Society planning committee, said drawings of the proposed scheme by architects John Simpson and Partners were excellent.
He added: "We believe that the proposals could be prudently amended to allow for greater use in either retail, office or studio environments.
"We have listened to arguments that too much housing would lay the city open to a flood of similar applications, which would be created by other firms following the A E Harris move. However, careful management and reduction in housing units would go towards impeding such a large-scale clamour."
Mr Hartland said the Jewellery Quarter could not remain untouched by progress.
"It is a very different place to what it was 200 years ago or 100 years ago and it will be a different place still in the future," he said.