The development would have reshaped the area that includes the Hall, the Royal College of Art and the main national museums - the Victoria and Albert, Science and Natural History.
The withdrawal of the Royal Albert Hall from the scheme, predicted in the Independent in the spring, is the first sign of a falling-out of arts organisations in the scramble for money from the national lottery.
The Royal Albert Hall management still plans to go ahead with its own scheme, which will involve lowering the street front outside and building an elevated piazza to link Hyde Park with the entrance to the hall.
Patrick Deuchar, the chief executive of the Royal Albert Hall, has also altered redevelopment plans to include pavement cafes along the hall's frontage and on the piazza in line with the Independent campaign for pavement cafes to give a more Continental feel to our cities.
But the decision to go it alone is clearly prompted by the belief that it is more likely to receive money from the Millennium Commission (funded from the national lottery proceeds) for a single pounds 30m scheme than if it is seen as part of a pounds 170m scheme linked with neighbouring museums.
The split between the Royal Albert Hall and the museums meant that the museums, which are planning a new Museum of the 21st Century, new links with the Underground station and more pedestrianisation, were having to change their story rather rapidly. Having publicly exclaimed the virtues of the joint approach, they are now emphasising the sense in the Royal Albert Hall going it alone.