Open again after 145 years, the eighth wonder of the world

In 1839 the entrepreneurial Frenchman Marc Brunel had a white elephant of mammoth proportions on his hands.

He had persuaded the British government to fund his venture into building the world's first underwater tunnel, which would be used to transport cargo from one side of an over-congested River Thames to the other. In 1825, he had convinced Queen Victoria that he could complete the project within three years and had enlisted the personal support of the Duke of Wellington.

But 14 years later the tunnel had flooded for the fifth time, killing many miners, was hopelessly over-budget even after a Treasury loan of £270,000 – a fortune in Victorian times – and was still only half way to its required length of 1,200ft.

Overwrought and desperate, Brunel had already suffered a paralytic stoke during the tunnel's construction. Having served a stint in jail for debt in his youth, he might well have been preparing himself for a longer stay at Her Majesty's Pleasure after racking up further debts through this latest ill-advised scheme.

But suddenly, he had a brainwave which transformed the white elephant into "the eighth wonder of the world". Brunel decided to turn the tunnel into the world's first underground shopping arcade, and was ably assisted in his aim by his engineer son Isambard Kingdom Brunel, who would later surpass his achievements by building the Great Western Railway.

The idea immediately captured the imagination of the nation, and in 1843 when it was opened as a shopping precinct 50,000 people turned out to see the grand "Thames Tunnel" in Rotherhithe, east London. Queen Victoria arrived in all her pomp, and brought so many excited supporters with her that it was feared the floor of the grand hall leading into the tunnel may not hold the crowd's weight.

Victorian aerialists and jugglers performed at the tunnel's shaft, with food and drink stalls selling "tunnel trophies" including cheroot boxes, spinning tops and gin flasks.

Such was the heady thrill for those who paid their penny to venture into the tunnel that some lost courage at its opening, becoming too scared to walk into the cavity above which the tumultuous waters of the Thames flowed less than five metres away. Others ran through the space too terrified to enjoy the view, but the most courageous ambled along dressed in their Sunday best.

Brunel had turned his near-disaster on its head. It was a hailed as a success across the world, such a feat of engineering that one million people – half the population of London – came to see it in the first 15 weeks, with thousands of European and American visitors following suit.

The American novelist Nathaniel Hawthorne, described the tunnel in colourful language as "an arched corridor of apparently interminable length ... all along the extent of this corridor, in little alcoves, there are stalls or shops, kept principally by women."

Brunel Snr received a knighthood for his work, but before long the subterranean space had been colonised by unsavoury types. Prostitutes, bag snatchers and criminals started to conduct their business there, and by the late 1840s decent society had begun to see it as a risky place of dubious morality, which was best avoided.

Brunel, perturbed by how quickly the image of his tunnel had become sullied, decided to make it appeal to higher Victorian society by holding a grand "Fancy Fair" in 1852.

The engineer threw all of his energies into the revamp, which he saw as an opportunity for the tunnel to distance itself from the bawdy, carnivalesque reputation it had acquired. He conceived a party so shimmering that it would drive away its image of impropriety.

The celebration did indeed eclipse the 1843 opening. The immense hall, half the side of the Globe Theatre, was filled with actors and performers entertaining the excited throng. There were sword swallowers, tightrope artists, Victorian strongmen, fire eaters, dancing horses, Chinese singers, minstrels from Montreal, Indian dancers and Ethiopian serenaders.

A specially commissioned "Thames Tunnel Waltz", played on a steam powered musical organ piped in the background, helped to turn the fair into an international show which drew admiration from across the world.

Robert Hulse, director of the Brunel Museum, which is situated just a few metres away from the Rotherhithe tunnel, said the fair provided further evidence of Brunel Snr's infinite resourcefulness.

The tunnel was later incorporated into the London Underground network as part of the East London line when the system was built in 1869. It has been inaccessible to the public for 145 years, but last night it was opened up once more for a re-enactment of the 1852 fair, as part of the annual East Festival organised by the Greater London Authority.

The public is also invited to visit this evening as part of the special two day opening. Mark Prescott, head of cultural campaigns at the Mayor's Office, said the re-enactment would include strongmen, fire-eaters and Brunel jelly in the nearby Brunel Museum, as well as a ticketed tour through the tunnel for the public.

The comedian and travel writer Michael Palin once likened the construction of the tunnel with the modern malady of spiralling costs and construction problems with government building projects.

"In a modern world of over-runs and wringing of hands when any great national building is delivered a few months late, it's worth remembering that this pioneering tunnel took more than 15 years, or almost 500 per cent longer to complete than had originally been estimated," he wrote in a forward to the book The Brunels' Tunnel.

He also describes the desperate measures employed by father and son to raise funds, which included a banquet thrown in the bowels of the tunnel when it was still sooty, rat-riddled and far from being finished.

He wrote: "Nowadays health and safety would have cleared the area for miles around, but the Brunels' answer to the recurrent flooding was to throw a party, inside the tunnel itself – a sit-down banquet complete with candelabra, cut-glass and the Coldstream Guards."

Marc Brunel: A lifetime of design

*1769: Marc Brunel, the French engineer and father of Isambard Kingdom Brunel, creator of the Great Western Railway, is born.

*1793: Arrives in New York and is involved in a scheme to link the Hudson River by canal with Lake Champlain. Also submits a design for the new Capitol building in Washington. The judges are impressed, but his ideas are rejected.

*1821: Moves to London and is imprisoned after getting into debt.

*1824: Creates interest in the idea of a tunnel in London at a lecture to the Institution of Civil Engineers.

*1827: Suffers a paralytic stroke.

*1840: Knighted by Queen Victoria, three years before the tunnel is opened.

*1843: Present at the launch of the SS Great Britain, an advanced passenger steam ship designed by his son.

*1845: Suffers another, more severe stroke.

*1849: Dies aged 80; his remains are interred in Kensal Green Cemetery, London.