A bid to save beloved Bath music venue Moles has been quashed after the council refused to protect the space.

The venue — which hosted early gigs from bands such as Pulp and the Smiths — announced it was closing with immediate effect and filing for insolvency in December after being "crippled" by the cost of living crisis. More than 4,000 people signed a petition to save the club, its closure was raised in Parliament, and the Music Venue Trust launched a six-point plan to ensure the place has a future as a grassroots music venue.

Step one of this plan was to get Moles recognised as an "asset of community value" by Bath and North East Somerset Council, a status which would delay any potential sale and change of use of the property and give the community six months to put together a bid to buy it. The Music Venue Trust then hoped to raise the funds to buy the venue and set up a community interest company to keep it going as a community interest company.

But, in a major blow to these hopes, the council refused to give the venue the status. The Music Venue Trust warned that this meant the opportunity to save Moles had been "permanently lost" but the leader of the council, Kevin Guy, said that the decision could be reconsidered if the group submitted a new application with more evidence.

The decision — which was delegated to council officers and not made by elected councillors — said: "The nomination puts forward the argument that the local community are supportive of coming together to run this as a music venue in the future. However, in our view this is not enough to show that there is a realistic prospect that the necessary funds will be sourced and made available to make this happen."

It added: "The venue operated as a business; no evidence has been provided to explain how there was any specific community use in the past. […] It is not realistic to think that in the future it will be used to further the social well-being or social interest of the local community."

A spokesperson for the Music Venue Trust said they were "saddened" the council had rejected the move. They said: "We believe the council's position that Moles was not of value to the local community and did not contribute to the social wellbeing of Bath residents to be in error. Unfortunately, the only people able to undo that error are the councillors who have made it, and we therefore see no available route to an appeal.

"A comprehensive plan to bring Bath Moles back into operation which had been brought together by the local community, key stakeholders and Music Venue Trust cannot be taken forward as a result of this decision. Consequently the venue joins too many others across the country in being permanently lost.

"There is little purpose in government legislation intended to protect highly cherished cultural spaces such as Bath Moles if the decision making to enact such powers is devolved to local councils who refuse to understand the value of live music in our towns and cities."

Mr Guy said: "Moles had a special place in the heart for so many of us, Bathonians and visitors to the city alike so we recognise this is disappointing news for the nominees.

"This application failed on a couple of fronts. The criteria for deciding success is very procedural and based on the information submitted to the council.

"However, should the community decide to submit another nomination, the council would require that only the actual music venue be considered as opposed to the technical fail of including the whole building, as well as sufficient new evidence, to demonstrate its positive impact in the future not just retrospective in the social interest or well-being of the local community, then it could be reconsidered as an asset of community value."

Moles was founded in 1978 and quickly became a Bath institution, with a reputation for platforming groups early in their career who would go on to make mainstream success, such as Bath-based group Tears for Fears.

The venue's owners said they had been forced to close the venue after 45 years amid massive increases in the cost of stock, utilities, and rent, at a time when customers had less money to spend. They warned that other grassroots music venues were also being forced to close.