Pete Roberts vividly recalls when he first entered The Twisted Wheel, aged 14. "Walking down the staircase with my heart pounding, I thought I had sold my soul to the devil."

Nearly five decades later The Wheel, the cradle of Northern Soul, is more popular than ever. On Friday nights and Sunday afternoons up to 700 soul music devotees – average age 40 – cram into the subterranean world situated on Manchester's Whitworth Street.

But having been rescued once from oblivion, after police shut it in 1971 amid concern over links to drug crime, a greater threat now hangs over the venue.

In April Manchester City Council will consider plans to demolish the site, with the possibility of erecting a 330-room budget hotel. Music fans are outraged. "They knocked the Cavern down in Liverpool and they regretted that," says Mr Roberts, 59.

The Whitworth Street plot has been bought by a London-based developer. One option is to lease it to a German motel chain. Opponents have signed petitions and have launched on-line campaigns. They say that the centre of Manchester has seen too much hotel development and complain that the city is sacrificing its cultural heritage. They say Liverpool realised its mistake over the Cavern only after bulldozers had done their worst and had to rebuild a copy on a different site in 1973.

The Wheel was among a network of clubs that sprung up across northern England in the 1960s and 70s. Its most famous rival, the Wigan Casino, named by Billboard magazine as the world's coolest club ahead of New York's Studio 54, was demolished in 1981. So too the Golden Torch in Tunstall, Stoke-on-Trent and the Blackpool Mecca, leaving the Wheel as the last of its kind. As well as paving the way for disco and rave, Northern Soul helped change racial attitudes in Britain.

"Manchester should be very proud that the club was operating a lot of black American artists at a time when there was segregation in their own country. A lot of the stars were in awe of The Wheel. They'd be carried on people's shoulders and were amazed that white people would do that for them," said Mr Roberts.

The Wheel began life as a beatnik coffee bar on Brazennose Street. It moved to its current location in the mid-1960s and then became synonymous with the emerging Mod movement, importing acts from the US and showcasing new UK talents such as Rod Stewart, Eric Clapton and Elton John.

Although it never had a license to sell alcohol, The Wheel was seen as being notorious for amphetamine use, which helped to fuel the all-nighter culture. Police believed drugs that had been stolen in chemist raids were being sold at the club, and forced its closure. But before the closure could take place, a visiting music journalist from London, Dave Godin, coined the phrase "Northern Soul", after encountering records he could not find in the capital.

Suzie Parlett, 41: "The only Sixties soul club still in its original building"

She's been going for 10 years after being introduced to the club by her boyfriend. "It is so important in the world of music. It is the only Sixites' soul club still in its original building where white working-class kids would listen to black music. We travel for three hours from Sunderland for the last Friday in every month. People are just really shocked that it could close. The atmosphere is just so great."

Barry Tasker, early sixties: "I was a Mod and we used to go there on our scooters"

A gardener, he has been going to The Wheel since 1964. "I saw John Lee Hooker, Little Walter and Sonny Boy Williamson at the old venue and Edwin Starr, Ben E King at the new site in Whitworth Street... I was a mod – you were either a mod or a rocker," he said.