Work on one of Edinburgh's most controversial architectural developments is to go ahead this year — despite concerns that it could endanger the City's World Heritage status.

A spokesman for Mountgrange, the property company that is developing the £300 million site next to the Royal Mile in the Old Town, said that work was likely to begin before Christmas.

He added that the scheme would reflect “the way we live today whilst respecting the past”.

Representatives of Unesco (the United Nations Educational, Scientific, and Cultural Organisation), which is concerned that the site may threaten the unique architectural heritage of Edinburgh, will assess its “state of conservation”.

Edinburgh was made a World Heritage Site by the organisation in 1995 but if its inspectors issue a critical report the city could lose its status.

“We had a number of concerns about Edinburgh. The decision of the committee was to dispatch a mission to the site to look carefully at all development projects and in particular the one at Caltongate, which was approved without looking at the conditions,” Mechtild Rössler, the head of the Europe and North America section of the World Heritage Centre, told The Times.

An inspector from Unesco will visit Edinburgh but it could be as late as April. Unesco has also asked the Department for Culture, Media and Sport to submit a report on development in Edinburgh by February.

The annual meeting of the heritage committee of Unesco, to be held in Seville next summer, will decide if action should be taken against Edinburgh. By then contractors could have been at work at Caltongate for six months.

The Caltongate development offers “a new urban setting” according to Allan Murray Architects, the company behind it. It includes an hotel and conference centre, offices, flats and a new street called Parliament Way. Mark Cummings, a spokesman for Mountgrange, said that it would create 2,000 jobs and bring 600 residents into the Old Town.

The Caltongate website said: “Very rarely, a development changes the entire dynamic of a major city ... it is in total harmony with the commercial life and history of Scotland's capital.”

This year the Edinburgh World Heritage Trust, established to oversee the Unesco site, said that the project would erode the character of the Old Town.

It objected to “the large building footprint of the hotel and offices”, the loss of listed buildings and keeping the outside wall of a building in the construction of the hotel.

James Simpson, the vice-president of the International Council of Monuments and Sites, said that his organisation had become concerned about the scale of Caltongate.

“To say that the heritage interest is against development is wrong. But development has to be done with a greater skill and sensitivity; that is not being achieved at the moment,” he said.

Opponents to Caltongate have been faced by a powerful lobbying campaign. Donald Anderson, the former leader of Edinburgh City Council, was appointed Scottish director of a public relations company employed by Mountgrange, and the developers made a donation to the Scottish Labour Party before council and Holyrood elections last year.

The development was approved this year by Edinburgh City Council, a decision endorsed by John Swinney, the Secretary for Finance and Sustainable Growth. Mr Cummings, the founder of Invicta, a second lobbying company employed by Mountgrange, said he was pleased that it had been approved.

Campaigners have used events in a German city to illustrate their point. The construction of a four-lane bridge in Dresden is said to compromise the area around the Pillnitz Palace. The world heritage committee said that if construction was not stopped, “the property would be deleted from the world heritage list”.

Ms Rössler said that Unesco was not against development. “We want the world heritage places to evolve, which is the normal situation for the people who live there. You cannot freeze a city,” she said.