Despite being the bookies' favourite, Newcastle-Gateshead yesterday lost its Capital of Culture bid. Gavin Engelbrecht looks at where North-East culture goes from here.

THE mounting tension is palpable as civic leaders wait for the news. Riding high on being the bookmakers' favourite to clinch the Capital of Culture 2008 crown, the Newcastle Gateshead Initiative has invested years of hard work and planning in this moment.

The prospect of attracting 14,000 visitors a year to the region is within grasp. So it is no surprise that when Culture Secretary Tessa Jowell names Liverpool instead, there is a stunned silence and dropped jaws.

Pausing only briefly to absorb the news, Newcastle Gateshead Initiative chairman Sir Ian Wrigglesworth is quick to regain his composure. Launching a salvo brimming with confidence for the future, his message is clear. The show will go on.

He says failure to win does not mean the plans will not go ahead, but just means it will take a little longer to realise their ambitions. Visitor numbers may have to be revised down, and the overall boost to the economy may not be as great, but it seems nothing can stop Tyneside's cultural advance.

He says: "We have lit a fuse on a rocket which has really taken off in a way we never expected. The commitment, enthusiasm and inventiveness of everyone involved has been absolutely tremendous. A lot of things that we have been planning will be going ahead and a lot of investment remains. A booster rocket on the side of our main rocket would have helped speed our progress. But the main motor is still firing on all cylinders and that will continue."

His optimism is not misplaced. For the bid in itself has seen renaissance of the region's fortunes and has been a catalyst for change, earning Newcastle the accolade of being named one of the eight most creative cities in the world by leading US magazine Newsweek. The Angel of the North has become an enduring icon and the Millennium Bridge captured the imagination of millions.

Bidding for the title has also set out a bold strategy for the future, putting culture at the heart of regeneration.

Already, there has been £3bn of new investment ploughed into a new infrastructure, including the Baltic, which attracted 400,000 visitors in its first four months of opening. Hotel capacity has increased by 50 per cent, with Newcastle Gateshead voted best short-break destination by the English Tourism Council.

And the best is yet to come, with a cultural extravaganza only 18 months away. A new dance centre - dance House - is proposed at a cost of £6m by the end of 2004. This will feature four new studios, a dance production space with seating for 250, a pilates studio, education centre and offices for independent dance companies.

In May 2004, Belsay Hall near Newcastle will be transformed by Stella McCartney, Agent Provacateur and Paul Smith, among others, to host a fashion and arts event.

The £9.3m restoration of Saltwell Park, Gateshead, started in June 2000, will be completed by 2005, returning the landscape to its original Victorian character. And the Newcastle Playhouse is being refurbished as part of an overall development of the University Barras Bridge site.

In the Ouseburn Village regeneration area, the Centre for the Children's Book has acquired a seven-storey mill and is about to start a £3m refurbishment programme. The building, due for completion in 2004 will become the only UK centre celebrating the wealth of British writing and illustrating for children.

And as part of a major international river festival, Newcastle has secured the 2005 Tall Ships Race. This will be the only UK leg of the event and could lead to a £50m cash injection for the local economy.

Not least is the £70m Sage, taking shape on the Gateshead Quayside. Due to open in 2004/2005 the spectacular curved glass and steel roof designed by Norman Foster encloses seven buildings in one. The biggest auditorium will seat 1,650 people.

Looking ahead, executive regional director of the Arts Council North East Andrew Dixon says: "We will roll up our sleeves tomorrow and carry on with the crusade to make a difference to the lives of people in the region."

For now civic leaders will be regrouping to reassess a renewed programme which will be announced in September - their enthusiasm undimmed by disappointment.

So what does Liverpool know about culture?

Liverpool was granted a Royal Charter by King John in 1207, and at one point was the British Empire's second city

The city holds the Guinness Book of Records title for being the Capital of Pop. More artists with a Liverpool origin have had a number one hit than from any other location.

Liverpool is the most successful footballing city in England, home to both Liverpool and Everton. It has won 27 League championships, four European Cups, three Uefa Cups, one Cup Winners Cup, 11 FA Cups, and six League Cups.

Its Walker Art Gallery is the national gallery of the North and houses one of the best collections of European art outside London.

It has the largest collection of Grade II-listed buildings outside London. The city has 2,500 listed buildings and 250 public monuments.

Liverpool's three graces - the Liver, the Cunard and the Port of Liverpool buildings - are to be joined by a fourth. Designed by Will Alsop, the Cloud is a futuristic, three-tiered structure that will be home to offices, a hotel and community facilities.

Its Anglican Cathedral is the largest cathedral in Britain and the fifth largest in the world. It was designed by Giles Gilbert Scott in 1904. The city has a second cathedral - the Metropolitan Cathedral, which was designed by Frederick Gibberd after the Second World War.

The Liverpool and Manchester Railway was the first successful passenger-carrying railway in the world. Trials for Stephenson's Rocket were carried out at Rainhill in 1829.

Liverpool has a thriving film industry. Films that have been shot there include The Hunt For Red October, The 51st State, The Parole Officer and Letter To Brezhnev.

Scouse is a type of stew. It was eaten by Liverpudlians living in poverty before the 1900s and has given rise to the term Scouser.