Scarborough will again boast Europe’s largest open-air theatre when it renovates a spectacular island stage that used to mount grand shows of 1,000 performers.

In the 1930s, when English seaside resorts were at their peak, it hosted extravaganzas such as Hiawatha with native American warriors in canoes paddling on to a stage the size of a football pitch.

Having lain derelict for more than 20 years, but having survived repeated threats of demolition, it is to be renovated next year as part of a £330 million regeneration of the town, it will be announced today.

The theatre, which seats up to 8,000 people, will become a venue for theatre, concerts, opera and dance and there are plans for grand-scale musicals and shows with stars such as Sir Elton John and Lesley Garrett.

The historic auditorium closed in the mid-1980s when the town could no longer draw the crowds. Donkey rides and Punch and Judy could not compete with cheap flights to Spain and guaranteed sun.

Now Scarborough and the surrounding area are attracting 5.8 million tourists a year, many of whom are Americans visiting York and Edinburgh.

The town, with a population of barely 40,000, is also home to Sir Alan Ayckbourn’s Stephen Joseph Theatre, the Victorian Spa Complex, with its own 1,600-seat theatre, and the Rotunda Museum’s world-class geology collection.

After it opened in 1932, the amphitheatre drew thousands each night, offering productions on a scale that few of today’s producers can contemplate. The stage is on an island, on a lake, with the audience seated across the water. It featured shows such as The King and I and Annie Get Your Gun that by 1952 had attracted 1.5 million people.

Scarborough has been inspired to reopen its amphitheatre by the recent phenomenon of outdoor productions in stately homes to which people come in their thousands. Tony Peers, a theatre producer, said: “Scarborough was ahead of its time.”

Recalling the sight of thousands of people sitting in the pouring rain as they watched Tom Jones at Castle Howard in Yorkshire, he said: “The British public just come with umbrellas. It’s a problem, but the British public buy into that.”

Gavin Henderson, principal of the Central School of Speech and Drama and an expert on seaside entertainment, said: “We’ve come to terms with our climate. If people want comfort they can get that at home. That’s not why they go out. They go out for the social experience – for meeting and mating, eating and dating.”

His excitement was echoed by Rupert Rhymes, of the Theatres Trust, who joked: “The worst summer for ages has inspired someone to reopen an open-air theatre.”

Peter Wilkinson, deputy chairman of the Scarborough Urban Renaissance Executive, said: “Our future is in cultural tourism.” But he added that Scarborough had also attracted 12 international businesses, including an HSBC call centre. An 83-acre business park is under development.

News of the theatre comes weeks after the town’s success as a centre of business was recognised with an Enterprising Britain award, which was presented at 11 Downing Street.

The great outdoors

— The Regent’s Park Outdoor Theatre is the only permanent professional open-air theatre in Britain and can accommodate 1,240 spectators

— The Minack Theatre, built on a cliff next to Porthcurno beach, Cornwall, puts on a programme of plays and musicals, amateur and professional, from May to September

— Glastonbury Festival is one of the largest outdoor events in Britain, attracting more than 150,000 music and arts fans to the village of Pilton in Somerset every June

— Proms in the Park is a series of outdoor classical concerts held in conjunction with the traditional BBC Henry Wood Promenade Concerts. Events attracting up to 30,000 spectators are held in Belfast, Glasgow, Swansea and London

— The first Womad world music festival took place in Shepton Mallet in 1982 and was established by Peter Gabriel. There are now versions of the event in more than 20 countries across the world

— Opera Brava is the leading outdoor touring opera company in Britain and has spent more than 21 years on the road, entertaining thousands of fans in beautiful locations around the country

— Gatecrasher is the largest outdoor dance music event in Britain – attracting more than 60,000 partygoers each year

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