Former directors of the Edinburgh International Festival and the Fringe have thrown their weight behind a plan to convert an Edinburgh children’s hospital into an arts community.

Sir Jonathan Mills, who headed the festival until 2014, and Paul Gudgin, a past director of the Fringe, said they backed a proposal to transform the Royal Edinburgh Hospital for Sick Children when it closes next year.

New work by Hans K Clausen featured at one Summerhall exhibition last year

Initial plans for the conversion of the four-acre site have been submitted by Robert McDowell, the owner of the Summerhall venue. He envisages an international gallery of children’s art and a museum of the festival, as well as accommodation for about 600 artists and creative businesses.

Sir Jonathan said that planners in the capital should, like Mr McDowell, “think outside the box” because the city’s cultural heritage made it unique in the world.

“Economic and social cohesion will not be nurtured here by the kind of social and economic models you see elsewhere,” he said.

Sir Jonathan said he was struck by Mr McDowell’s success in 2011 in converting a former veterinary college into Summerhall, which has been described as an increasingly sustainable venue encompassing a range of creative businesses. “It employs a lot of people, it is a community focus, which evolved in front of people’s eyes,” he said.

“Robert got artists together, with people who were interested in fashion and food, jumbled them altogether, and hey presto, you have an interesting cocktail that works.” The same could happen at the hospital site, Sir Jonathan said. “How long do we need to deny what is under our nose? Edinburgh should learn from its own success.”

Mr Gudgin, who presided over a doubling in scale of the Edinburgh Fringe between 1999 and 2007, was also impressed by Mr McDowell’s vision.

“A gallery dedicated to children’s art would be a touching and appropriate way to use such a significant building,” Mr Gudgin said. “A museum dedicated to the festival, or festivals generally, would be a great way to provide a 52-week emblem of Edinburgh’s status as one of the world’s great festival cities.”

The arts proposal was one of several bids from developers received by NHS Lothian this month. Most are thought to be housing projects.

Mr McDowell said that he believed it was important for Edinburgh to strengthen its creative community to meet growing international interest in Scotland and its capital. Should his idea sound idealistic, he asked sceptics to consider Edinburgh in August when millions of people descend on the city: “My god, it’s wondrous. A month when culture is bigger than shopping. How fantastic is that?”

Summerhall stages about 800 events a year, including an annual Christmas sale at which Fiona Dean, a taxidermist, sold painted stag skulls

Mr McDowell, 65, is the sole shareholder in Summerhall Management. The venue he runs receives about 700,000 visits a year, staging 800 shows and events. In its first year it was voted best new venue on the Fringe, and since then its productions have won a succession of prizes for visual art, theatre, dance, music and children’s shows.

Glory has, however, come at a cost. Summerhall Management has operated at a six-figure loss in every year since its foundation.

However, Mr McDowell, an Ulsterman who inherited a chunk of a huge property empire, appeared undaunted. He laughingly quoted his friend Richard Demarco — “It is obscene to make a profit out of the arts” — although he said that his intention eventually would be to break even.

The hospital project would be different. Mr McDowell intends to raise capital from private backers and approach agencies such as Creative Scotland. He has already sounded out government about his proposal.

A rival bid is likely to come from a community group. The Marchmont & Sciennes Development Trust is said to have been in discussion with NHS Lothian about the future of the site, envisaging a redevelopment which includes a healthcare facility, affordable housing and opportunities for community enterprise.

While applauding these efforts, Mr McDowell said that the community plan was “at the other end of the same spectrum as the developers — it looks at the place as a commodity”.

Services at the children’s hospital will be transferred to a new purpose-built unit at the Edinburgh Royal Infirmary site at Little France.

• The bid to privately raise £15 million of the £66 million cost of the revamp of Glasgow’s Burrell Collection has been boosted by a six-figure donation. The W M Mann Foundation has pledged £100,000 to take the amount raised so far from trusts and private individuals to £2 million, which includes support from more than 100 individual funders. Work is beginning on the revamp, during which the Burrell Collection, in the south side of Glasgow, will stay closed until 2020. Glasgow city council agreed to provide up to 50 per cent of the costs and approved funding of £27.3 million for the project at a meeting on February 16. The Heritage Lottery Fund has pledged £15 million for the project and the UK government committed £5 million in November 2015.