Hopes of reopening Shepton Mallet's Amulet theatre have suffered a major setback after the government withdrew £5m in promised funding.

The funding, pledged by the previous administration, had been on hold since July following the general election.

The new government has now scrapped the commitment, stating that funds will be redistributed through a new process, with venues able to reapply.

Campaigner Martin Berkeley, who has been leading efforts to restore the Amulet, said the funding would have been transformative for Shepton Mallet, helping to bring new cultural opportunities to the town.

In a statement, the group behind Buy the Amulet said: "Having spent many months building a strong funding bid, which had won local authority and MP approval, we are very disappointed by this decision.

"We will continue to work on the campaign and now have our bid ready to submit, whenever the next round of community funding is available."

The Amulet theatre, which has been closed since 2010, is the only cultural venue in Shepton Mallet. The funding had been seen as a vital step towards reopening the space and revitalising the town's arts scene.

A government spokesperson said that funding had to be re-prioritised due to budget constraints, with a focus on projects at an advanced stage that will have the greatest economic impact.

"This government inherited unfunded commitments to these projects, along with many others, but by making difficult choices we have managed to re-prioritise some funding within extremely tight budgets," they said.

"We have carefully considered the responses to our consultation and chosen projects at an advanced stage that will have the greatest impact on local people and economic growth - this government's number one mission."