The Royal Shakespeare Company has again confirmed that major demolition is no longer part of the #100 million redevelopment plans for its 73 year-old theatre in Stratford-upon-Avon.

Highly controversial proposals to demolish the former Shakespeare Memorial Theatre arose from the belief that it would be impossible to carry out a major configuration of its auditorium within the existing walls, but the company indicated a change of heart just over a year ago.

Now a feasibility study by a design team led by Bennetts Associates, who succeeded Dutch architect Erick van Egeraat earlier this year, has concluded that a new auditorium with a thrust stage like that in the RSC's successful Swan Theatre can be squeezed between the existing fly tower and the listed Art Deco foyer - just.

By making use of the Union Club site across the road to accommodate rehearsal and education spaces, production workshops and offices the architects say that all the company's aspirations can be met.

However, the Royal Shakespeare Theatre is likely to undergo some external change, particularly at the western end where it is proposed to create a new joint entrance and foyer serving both the main theatre and the Swan.

External changes, including a new public square and an improved riverside terrace on a single level, will be integrated with a wider package of environmental improvements planned for the Waterside area.

The strategy means that highly prized details of Elisabeth Scott's 1932 building, such as the art deco foyers and fountain staircase, will be retained and enhanced.

RSC chairman Sir Christopher Bland said: "I am absolutely delighted with the work Bennetts Associates have done so far with the RSC team, which has the enthusiastic support of the entire board. They have demonstrated that it is possible to transform the existing Royal Shakespeare Theatre in a way that marries the best of the past with our ambition to create the finest modern playhouse in the world for Shakespeare.

"This feasibility study has been critical in helping Bennetts to understand both the RSC and Stratford. Now the challenge is to move from concept to outline designs."

Moves to redevelop the Royal Shakespeare Theatre, which began eight years ago, were prompted by concerns that too many seats are remote from the stage - particularly the cheaper ones in which young people often have their first experience of Shakespeare. Dissatisfaction was intensified by the popularity of the Swan, which opened in the 1980s and has a much more intimate relationship between actors and audience.

Briefings on the feasibility scheme are planned with national interest groups such as English Heritage, CABE, the Theatres Trust and the Twentieth Century Society, and locally with Stratford-on-Avon District Council, Stratford-upon-Avon Town Council and a wide range of local amenity and community groups, before the design team move on to prepare outline designs. It is hoped that building work will begin in 2007.