Astronomers at Jodrell Bank are confident of securing a £12.4 million upgrade, despite sweeping cuts being planned by the Particle Physics and Astronomy Research Council.
The proposal would increase the sensitivity of the Merlin national radio astronomy network based at the Cheshire observatory by a factor of 30.
But the decision to join the European Southern Observatory means that the PPARC is restructuring its UK ground-based telescopes to make savings for the membership fees. The astronomy committee is due to meet in February to decide which projects will be axed.
Phil Diamond, director of Merlin, said: "We're relatively confident we won't be included in the reorganisation.
"The ESO does not offer any radio astronomy capability and the PPARC have stated that radio astronomy should not suffer as a result of us joining the ESO."
Another possible funding route would be through the Northwest regional funding review, the Daresbury Development Group, which is due to report its recommendations to the government at the end of this year.