Roman Abramovich has put a £1bn scheme to redevelop Chelsea’s Stamford Bridge stadium on hold in response to suffering delays in the renewal of his visa to enter the United Kingdom.

The club confirmed that plans to transform their home of 113 years into a 60,000-seat arena had been mothballed. A 49-word statement published on their website on Thursday pointed to the “current unfavourable investment climate” as a key factor in their reasoning, yet the Home Office’s delay in renewing Abramovich’s visa, which had expired, is understood to have prompted the owner’s decision to shelve the scheme.

Abramovich is apparently reluctant to invest heavily in a major project in the capital of a country where he has been denied a visa. The oligarch, who has been a regular visitor to Britain since buying Chelsea in 2003 but does not hold an employment position at the club, was unable to attend his team’s victory in the FA Cup final at Wembley this month with the process unresolved, and has since secured Israeli citizenship.

An Israeli government spokesperson confirmed this week that the 51-year-old was to move to Tel Aviv. Although he would be able to visit the UK visa-free for up to six months at a time on his Israeli passport, Downing Street has confirmed he would not be permitted to work in this country.

The Jerusalem Post reported on Thursday that the billionaire had withdrawn his request for a British investor visa, quoting a source close to Abramovich as saying: “He understands and respects that the UK are reviewing their processes and has therefore chosen to withdraw until a new process is in place.” Once a new policy was in place, the source added, Abramovich would “want to clarify any misunderstanding and speculations. He has spent many years in the UK and is a legitimate businessman, nothing has changed.”

The issue has flared at a time of heightened tensions between Britain and Russia since the poisoning of the former Russian spy Sergei Skripal and his daughter Yulia in Salisbury in March. Britain has blamed that act on Russia, though the Kremlin denies involvement. Abramovich’s previous tier one visa, which allows anyone who invests more than £2m in the British economy to stay for 40 months, had been granted before tighter regulations were introduced in April 2015. The government has since launched a further crackdown on wealthy investors coming to the UK and, it is believed, would have required some financial disclosures if Abramovich’s UK visa were to be renewed.

Chelsea’s stadium will next season have the smallest capacity of the Premier League’s current top six clubs. Photograph: Nick Potts/PA

Chelsea, who finished outside the lucrative Champions League qualification places last season, insist Abramovich remains as committed to the club as ever, and will continue to invest funds for transfers. However, the desire to redevelop Stamford Bridge had been motivated primarily by the prospect of increased match-day revenues, which would allow the Premier League side to be more competitive in the transfer market while complying with Uefa’s Financial Fair Play regulations.

The ground’s 41,631 capacity leaves them in the smallest stadium of the current top six given Tottenham Hotspur will return to a redeveloped White Hart Lane next season. In that regard, the decision to put plans on hold would appear to damage the club’s long-term ability to compete financially with the Premier League’s elite.

Chelsea had previously explored purchasing the Battersea Power station site and land around Earl’s Court, before opting to transform Stamford Bridge into what the architects, Herzog and de Meuron, described as a “cathedral of football”. Planning approval was received from Hammersmith and Fulham council last year, with the mayor of London Sadiq Khan also giving the green light, and Chelsea had hoped to move to Wembley for up to four years while work was carried out.

Costs for the ambitious scheme had escalated wildly, doubling to around £1bn largely because of the time allocated to the build and its complexity. Chelsea had started the process of sounding out banks and blue-chip companies over commercial deals and to seek a potential naming-rights partner, though they would have leant heavily upon Abramovich to fund the project.

“Chelsea has put its new stadium project on hold,” the club said. “No further pre-construction design and planning work will occur. The club does not have a time frame set for reconsideration of its decision. The decision was made due to the current unfavourable investment climate.”