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A multi-million pound plan to turn Clerkenwell’s Old Sessions House into a “social gathering point” suffered a setback this week when a bid for an alcohol licence was rejected.

Swedish brothers Oliver and Ted Grebelius are in the process of turning the 18th century grade II-listed building into a private members’ club, with a food market on the ground floor and a restaurant and wine bar on the top floor.

They were granted planning permission in March last year but on Tuesday a Town Hall licensing committee rejected their alcohol licence application, which would have seen drinks served until midnight from Sunday to Wednesday and 12.30am from Thursday to Saturday.

The building sits in one of Islington’s cumulative impact zones – areas that already have a high number of licensed venues – which means there is a presumption against granting new applications.

There have been 201 objections to the drinks bid from residents living in and around Clerkenwell Green, including elderly residents who live on the nearby Clerkenwell Green estate. They fear it will bring hundreds more drinkers to the area late at night.

Oliver Grebelius said: “We are still extremely confident that the public uses we have proposed are the best way to use the building. We will show the licensing committee and residents an even stronger proposal shortly.

“It would be a great shame if the building were to end up with a sealed single-occupier use and once again be locked away from the public because of too stringent licensing.”