"We are going for a world class city and a business friendly city, and access is the starting point and the key to establishing a thriving environment.
"That means traffic being able to get in and out of the city, both business traffic, and more importantly for visitors to be able to access our shops and services.
"As always these things are time critical. It's crucial that the council comes up with an alternative plan as soon as possible."
The by-pass would have relieved localised congestion, support access to Grosvenor's new Liverpool One shopping centre, and improve access to the Kensington New Deal communities area. Council leader Warren Bradley said in a statement yesterday he had received assurances from the Royal that it would be able to rebuild in its current site.
He acknowledged the council had been working on the scheme for years - to a point where the city was in the process of seeking Compulsory Purchase Orders around the site.
But, he said: "The hospital is a facility which serves many thousands of local residents and ultimately that has to come before a road scheme.
"The health of the people of the city is paramount."
He added: "It is now down to them to deliver the world class hospital that they have promised."
Cllr Bradley's decision must be ratified at the next meeting of the council's executive board on June
16. If the members agree, it will automatically cancel a public inquiry into the Hall Lane Gateway Scheme.
The deal means the hospital is now free to submit its Outline Business Case to the Department of Health, but it will not hear if it has had its funding fully approved until summer 2007.
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