It is a rivalry that could prove to be a plague on both their proposed houses.

Four hundred years after Shakespeare began writing plays in the foetid backstreets of East London, the race is on to build a state-of-the-art theatre in the neighbourhood where he cut his artistic teeth.

Two companies – one professional and backed by one of the country’s leading classical actors, one venerable and amateur – are seeking funding to construct theatres on sites only a few hundred yards apart in Shoreditch, the birthplace of modern English drama.

Both claim to be heirs to The Theatre, London’s first purpose-built playhouse, where Shakespeare’s early plays were staged.

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One of the new theatres will be built on the remains of that building, which was uncovered by archaeologists last year.

The other is in the grounds of St Leonard’s Church, where Richard Burbage, the great actor who gave the first performances of Hamlet, Macbeth, Othello and King Lear, is buried.

Both companies plan to name their new buildings The Theatre, in homage to the original which was later dismantled and rebuilt on Bankside as The Globe.

Both designs are modern but consciously evoke the no-frills adaptability of Elizabethan theatre, both are aiming for completion in 2012 to coincide with the Olympics and both are selling themselves as much needed community centres for one of the country’s poorest boroughs.

Even in more prosperous times, it is unlikely that two such similar projects could succeed.

In the current economic climate, the odds against Shoreditch humming with competing playhouses, as it did in Shakespeare’s day and again in the music hall era, are formidable.

The area already has one new fringe theatre, The Courtyard, which opened in a Victorian former library building in 2007. Since then public funding for new arts premises has become almost impossible to come by.

The Arts Council has closed its programme for investing in new capital developments and councils have cut back across the board.

Private investment in the arts is also less likely to be forthcoming for such a risky undertaking in a city that is already full of performance spaces.

For the moment, however, those behind the companies remain convinced that they can bring The Theatre back to life.

Big Space Theatre Productions, which was formed in 1993 and is currently based at St Leonard’s, has spent four years working on plans for a £5 million theatre with 400 seats and “lots of glass and steel” in the church’s disused graveyard.

Richard Burbage and his father James, the impresario who built The Theatre in 1576, were among the 100,000 people buried at the site. Today it stands opposite a row of bars that typify modern Shoreditch – and a strip club that serves as a reminder of its seedier past.

Their project is supported by Patrick Stewart, whose son Daniel is one of the company’s four directors. The veteran actor, who is known for his roles in Star Trek and the X-Men films, as well as a series of acclaimed Shakespearean performances, says that Big Space is “one of the most important and vital companies working in the world of classical theatre”.

A couple of streets away, on New Inn Broadway, the Tower Theatre Company, an amateur troupe that was founded in 1932, is developing a plan for a theatre with 120 seats.

Penny Tuerk, the chairman of the trustees, said that the company has already raised £3.6 million of the £7 million that it needs and is applying for planning permission next month.

Last year the Tower company enjoyed an extraordinary stroke of luck when archaeologists from the Museum of London discovered the lost foundations of Burbage’s original theatre beneath their proposed building.

The remains will be preserved in the plans for the site, Ms Tuerk said. “I have this vision of our actors stepping over the boards that Shakespeare trod to get to the stage each night.”

The Tower project is more advanced and has the stronger physical link to the original theatre, but the team at Big Space Theatre Productions is unfazed.

“I’m not worried about them,” John White, one of the company’s directors, said yesterday. “They’re amateurs doing their three nights of Whitehall farces and we’re hardened professionals. We certainly won’t be sharing an audience, but I think there’s room for all of us.

“Why shouldn’t we have two or three theatres here with the history of the area? This is where it all started and it’s right and proper that theatre should come back here.”

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