A controversial bid to take down a "racist" pub sign has been abandoned despite being promised thousands of pounds of public money.

The Pub Sign Project was formed to replace a sign showing a white woman trying to scrub a black baby white.

Campaign organisers said many people found the image offensive and wanted to design a new one while exhibiting the old sign inside the pub with an explanation of its history.

The project was pledged £25,000 by the Countryside Agency's Local Heritage Initiative fund, £5,000 by the Nationwide Building Society and smaller grants from West Sussex County Council and Arun District Council.

But the landlord of the Labour In Vain pub in Westergate, near Chichester, says he has not heard from the project for months. And the Countryside Agency said the sign was likely to stay because the scheme had fallen so far behind turning its aims into reality.

The project committee, chaired by Paul Wilson, has so far been given - and has spent - just £2,000 of its Countryside Agency grant and is expected to be allowed less than half of the £25,000 for a scaled-down local history scheme.

Previous attempts to get in touch with the team have won no response and another letter asking for a progress report was posted yesterday.

The sign, thought to date back almost 300 years, shows a woman scrubbing her baby on one side. On the other side she is pictured scratching her head in frustration that he remains black.

Landlord Steve Bundock said: "There is no way the sign is racist. We have a lot of black people in here and not one of them has found it offensive. If anything it is the white woman who looks stupid.

"The sign is unique - the only one of its kind in the country - and is part of the area's history.

"The protesters raised their ideas and I said if they could convince the locals it should be changed, I would be in favour. But I haven't heard from Mr Wilson for six months."

The project insisted its fund-raising campaign was not just to replace the sign but also to back events raising awareness of local history.

Its first event, called Down Memory Lane, was held at Westergate School last July.

About 140 people attended and saw stalls and displays run by community groups including Yapton and Ford History Group, Slindon History Group and the Oral History Society.

There were plans for activities including an illustrated talk on the Labour In Vain sign and a publication about the history of surrounding villages.

The project's web site, at www.pubsignproject.org.uk, has not been updated since last summer when it promised an autumn oral history programme and a "substantial" book on the history of the area.

Countryside Agency head of media Isobel Coy said: "Unfortunately it seems this particular project has slowed after the controversy surrounding the possible removal of the sign.

"There won't now be a permanent exhibition inside the pub and the sign is staying up."

A county council spokeswoman said: "It's a condition of us giving money that if the project changes to any degree they need to tell us about it."

Mr Wilson, from Westergate, was unavailable for comment.