Bernie Ecclestone's dream of Grand Prix in London is heading for the pits

A plan to turn some of the capital's most congested streets into a 180mph race track was veering towards the pits last night as Formula One chief Bernie Ecclestone's vision for a London Grand Prix was announced. It could be the first time since 1938 that the city has hosted an international competitive motor race with billionaire Mr Ecclestone offering to provide £35m backing for the project.

Under the proposal, which was unveiled during a glitzy video presentation by Lewis Hamilton and McLaren team-mate Jenson Button at the RAC Club in Pall Mall, powerful supercars would race around a 3.2-mile circuit.

They would pass Buckingham Palace, the House of Commons and race alongside the Thames before returning via Piccadilly Circus – a route expected to take only 93 seconds.

Former world champion Mr Hamilton said: "A grand prix here would be the best thing in the world, the biggest event, sensational."

But green campaigners, business leaders and taxi drivers raised concerns about the plan, while Westminster Council, which would be responsible for the track, said it had not been consulted.

Motor sport insiders insisted it was little more than a pipe dream long-held by Mr Ecclestone. Experts pointed out that the route took in Admiralty Arch and that its three single-lane arches made it impossible for motor racing.

A similar plan to turn the Olympic Stadium in Stratford into an F1 track is currently being considered by the London Legacy Development Corporation. It is feared the street race, sponsored by Spanish banking giant Santander, could cause a month of disruption, as it does in Monaco. Previous attempts to stage the race in the capital have failed, although a demonstration event through the West End in 2004 was popular.

London Mayor Boris Johnson said he would need to be convinced of the economic case for the event, which comes amid trepidation over city-wide disruption during the Olympics. "I am broadly positive providing we can satisfy the air quality and noise issues," he said.

Backers claimed the event could net £100m for the London economy and be watched by 120,000 spectators. But Robert Davis, deputy leader of Westminster City Council, said the announcement had come out of the blue. "This is an event that would have obvious benefits to London in terms of finance and profile – but the council will wish to also put forward any concerns we receive from residents," he said.

Darren Johnson, London Assembly member for the Green Party, urged the Mayor to veto the "crazy" plan.

John Thomas, chairman of the Licensed Taxi Drivers Association, said his members were being hit by the imposition of route changes and rank closures as a result of the Olympics.

"This is their shop floor – it is their place of work," he said. "There will be more tourists but there will also be disruption. I just hope that whoever organises it is not the same person who organised the Olympics."

Business leaders cautiously welcomed the idea. Jace Tyrrell of the New West End Company, which represents retailers, said: "Do we want events to promote the city around the world? Yes, we do. But we need to make sure it doesn't impact on traders."

Mr Ecclestone, 81, believes the race would be a winner. "It would be fantastic, good for London, good for England – a lot better than the Olympics."

However, the announcement comes a day after a former business associate of Mr Ecclestone was jailed for more than eight years by a German court for tax evasion and bribery. The case centred on a £28m payment by the motor racing supremo made in connection with the sale of a stake in Formula One to a private equity group in 2006. Mr Ecclestone admitted making the payment but said it was to avoid being blackmailed. He denied any wrongdoing, and said he was now facing an inquiry into his tax affairs by the UK authorities.