A fond farewell to the theatre that put Liverpool on the stage

It might never have been hailed for the lavishness of its productions nor the extravagant comfort of its seats, but few theatres can have produced an array of talent to match that which emerged from Liverpool's Everyman. For decades, the converted chapel building with its famous bistro – an early hangout for the 1970s vegetarian set – formed the backdrop to Bohemian life on Merseyside as well as launching the careers of stars such as Julie Walters, Jonathan Pryce, Bill Nighy and Daniel Craig. It was here that Willy Russell premiered Shirley Valentine and Alan Bleasdale honed his dramatic skills which were to culminate in the epic TV drama Boys From The Blackstuff.

Now the city landmark is to be torn down and rebuilt as part of a £41m project to revitalise the theatre in Liverpool as it reaps the dividends of its 12-month stint as European Capital of Culture. Although some are already lamenting the end of an era, the Hope Street venue has been declared "unfit for purpose" and will be demolished by 2010. Its sister theatre, the historic Playhouse, will also benefit from the huge cash injection, as it is due to undergo a complete refit after warnings that both venues faced a "long lingering death" if money to rebuild them was not found.

Although the actual cash to finance the works is still not guaranteed, the demolition of The Everyman will signal a new act in the life of the theatre – a bastion of experimental and social drama in post-war Britain. The curtain went up in 1964 when Liverpool was the mecca for the rest of a world gripped by Beatlemania. Yet the first production was conventional enough – a shoestring reworking of Shakespeare's Henry IV, Part One.

But despite the perpetual state of ongoing financial crisis the theatre was soon gaining a reputation for mixing the avant-garde with the classics. In 1967, amid the Moliere and Brecht, a young Roger McGough produced his first play. Fellow poets Adrian Henri and Brian Patten were regularly in the audience.

Many of the older generation didn't like what they saw. One demanded the city council close the place down after witnessing a performance of As You Like It, incandescent at "how these half-naked ignorant looking young things speak the immortal lines". Others – the Daily Mail among them – bridled at the apparent acceptance of the word "fuck" as a legitimate tool oftheatrical dialogue.

But it was in the early 1970s that the venue, its writers and actors hit their stride. Against a worsening economic background, amid the breakdown of old social patterns, the first gloomy impact of mass unemployment and bitter industrial strife in the city, artistic director Alan Dosser assembled a company of actors which, at one time, was to include Pete Postlethwaite, currently playing Lear at the Everyman, Trevor Eve, Matthew Kelly, Antony Sher, Alison Steadman, George Costigan and Bernard Hill alongside Walters, Nighy and Pryce. There was some prodigious nudity, mainly male, and Dosser developed the theatre's social conscience by offering free seats to unemployed families and reflecting the turbulent events going on around Merseyside. In Fish in the Sea, Dosser looked at a single Liverpool family hit by the realities of strikes and events back home in Ireland. Chris Bond's Under New Management told the story of workers facing redundancy at the Fisher-Bendix factory in Kirkby while in Tarzan's Last Stand, Antony Sher dressed up in leopard skin to play Enoch Powell.

The sense of experimentation continued when Alan Bleasdale made his writing debut for the theatre with No More Sitting on the Old School Bench in which the artistic direction was billed on the programme as "co-operative".

By the early 1980s Liverpool was a tinder box and when the Toxteth riots flared, the Everyman was on hand to reflect the sense of mounting concern over the city's future with 1984 Like – a play which was denounced by one Tory MP as "seditious". In 1995, when Bill Drummond and Jimmy Cauty's KLF film was screened – in which they burnt a million pounds – it prompted anger and walkouts from the audience.

Theatre critic Joe Riley, who has been going to plays at the Everyman on behalf of the Liverpool Echo since 1974, believes sentiment should play no part in the decision making over the theatre's future.

"It was very much the people's theatre and it has always had a political edge to the things it does. It was the sort of place where you would see people sitting down on hard wooden seats, wearing jeans – they didn't mind if they caught their clothes on a nail. But things have changed and people won't put up with that now," he said.

"But some of the stuff was pretty naff. It is only in retrospect you realise you have been in the presence of people who are going to have extremely long careers. At the time they are just jobbing actors. The Everyman has never been known for the lavishness of its productions but by the quality of the actors and the writers it has produced," he added.

Professor Michael Brown, chairman of Liverpool and Merseyside Theatre Trust, said the spirit of the theatre would remain intact. "We realise everyone loves the Everyman and we are reconciled that we have to do this so as to recreate the same atmosphere. It will have the facilities for making sets, costumes, all the things you would expect in a modern theatre," he said.

Having been established as the city's cultural spending priority, there will now be a process to seal the work deal with bids for funding from public bodies as well as private appeals to add to £6m already pledged by the Arts Council England, North West.

Take a bow: Everyman actors

Willy Russell

First play staged in 1972. When the Reds charted the history of Liverpool Football Club. Went on to write Shirley Valentine and Blood Brothers.

Pete Postlethwaite

Joined in the early 1970s under Alan Dosser. Now a major Hollywood star. Currently performing as Lear at the Everyman, as part of Liverpool's European Capital of Culture year.

Julie Walters

Joined in 1974 under the direction of Jonathan Pryce in Cantril Tales, a spoof adaptation of Canterbury Tales. Appeared in the film version of Willy Russell's Educating Rita.

Jonathan Pryce

Former artistic director who went on to star in films including Evita, Glengarry Glen Ross and Tomorrow Never Dies.

Alan Bleasdale

Made his debut in 1978 with No More Sitting on the Old School Bench before capturing the mood of 1980s Britain with Boys From the Blackstuff.

Bill Nighy

Debut came alongside Julie Walters, performing Chaucer to the strains of "Great Balls of Fire".