Around midnight, at certain tides, church bells can still be heard tolling from the lost city of Dunwich. Or so local legend has it. The sound comes from beneath the waves of the North Sea, for Dunwich – one of England's most prosperous medieval centres, a place some consider a rival to 14th-century London – has been sunk beneath the waters for 500 years and more. Visit Dunwich today and you will encounter a quiet Suffolk coastal village with steeply sloping shingle beaches. From time to time the waves move the pebbles to expose the great black sea defences which lie amid the stones like great beached whales, designed to slow the longshore drift of the beach into the oblivion to which the once great city has been consigned. Today the real Dunwich lies out there beneath the cold grey waters, 50 feet down and perhaps a mile out.

This British Atlantis – with its eight churches, five houses of religious orders, three chapels and two hospitals – is now about to be exposed to human gaze for the first time since the first of a series of great storms and sea surges hit the East Anglian coast in 1286 and began the process of coastal erosion which led to the city's disappearance. For the past 30 years one man, Stuart Bacon, a marine archaeologist and director of the Suffolk Underwater Studies, has dedicated himself to discovering what lies beneath the waves. He has made more than 1,000 dives on the medieval site since 1971 but with limited success. High silt levels in the water mean that visibility is limited to just a few centimetres.

"You can't see," he says. "The water is black because of the sediment in suspension. On very rare occasions visibility can be one to two metres but more usually it is one or two centimetres. You can't read your watch with a lamp on some occasions."

He has explored by touch, with the aid of a map drawn in 1587, which has proved remarkably accurate. But, from May, Mr Bacon will be teaming up with Professor David Sear, of the University of Southampton, and they will bring to bear the latest underwater acoustic imaging technology to reveal the secrets of the past.

It will be the realisation of a life-long dream for Mr Bacon. Born in nearby Aldeburgh he was first taken to Dunwich by his parents as a boy in about 1947. It had not been long since the last of Dunwich's ancient churches, All Saints, toppled from the clifftop to the beach 40 feet below. "We sat on the ruins on the beach for picnics," he recalled. "As a boy I was full of questions about the place that no one seemed able to answer. So when I qualified as a diver I decide to make Dunwich my special study."

All Saints had been abandoned by its parishioners in the 1750s, though burials continued in the churchyard until the 1820s. But the cliff edge had reached the church in 1904 and the tower by 1922. It was in 1971 that Mr Bacon found the remains of the church in the water. "When a church goes over the cliff it doesn't go intact," he says. "It gets ruined on the cliff top and then falls down on to the beach in a line of stones. All Saints was 147 feet long. That's an awful lot of masonry, tons of material. It's not easily washed away."

Two years later, in 1973, he discovered the ruins of St Peter's Church, which was lost to the sea during the 18th century. He launched major diving expeditions in 1979, 1981 and 1983, with 60 divers from six boats at one point, before the blackness of the water brought him up against the limits of what was possible with the techniques available.

But he knew the story of Dunwich went back much further. The Romans were there and it is likely that it was the site of Dumnoc, the first episcopal see of Saint Felix of Burgundy, the man who introduced Christianity to eastern England, becoming the bridge-builder between the Celtic Christians who had come from Iona in the north and the Roman ones who had come via Augustine, the first Archbishop of Canterbury, to the south. Dunwich was, according to the historian Miles Jebb, the "ignition point of English Catholicism". Antiquarians described it as the capital of East Anglia.

Certainly, by 1086, the Domesday Book recorded a town of three parish churches with 290 burghers – including 24 Franci who had come from Normandy with William the Conqueror – some 3,000 citizens and "an hundered poore people". It could afford to give the king, his inspectors decided, an annual gift of "fiftie pounds and three score thousand herings". It was accorded the prestige of a Mint. In the reign of King Henry II (1133-1189) William of Newborough recorded it as "a towne of good note, and full stored with sundrie kindes of riches".

Indeed, such was its substance that when in 1173 the Earl of Leicester mounted a rebellion against Henry he landed his army near Dunwich and tried to persuade its people to join him. The city prepared to defend itself with such resolve that the pretender withdrew. Not long afterwards, Dunwich was granted a royal charter with its own borough council, magistrates, two bailiffs, a recorder and a coroner.

The prosperity to rival London came from its exports of wool and grain and imports of fish, furs and timber from the north, cloth from Holland and wine from France. Its status was reflected in its buildings, which included a grand Preceptory of the Knights Templar similar to the celebrated Temple Church in London.

In 1308 an inventory showed it possessed the massive sum of £111 contained in three great purses. In the 50 years that followed, three of the most prestigious religious orders of the Middle Ages – the Benedictines, Dominicans and Franciscans – established houses there. A hospital for lepers was built. The economy thrived, with sheep and pig rearing and rabbit farming.

There was also a major shipbuilding industry. Ships from Dunwich traded with continental Europe but travelled as far as Iceland for cod and ling as well as catching herring and sprat locally. The craft were requisitioned in war. In 1229 King Henry III requested 40 ships from Dunwich "well equipped with all kinds of armament, good steersmen and mariners" – about one eighth of the fleet that sailed from Portsmouth in 1230 to make war in France.

But even by 1279, when Dunwich possessed 80 large ships, the sea was already making incursions. Shingle was constantly shifted by the sea into the harbour. Residents fought to save their livelihood, shovelling stones and sand away by hand and strengthening the sea walls.

This was a town worth defending. In 1295, Dunwich was enfranchised to send two members to parliament, elected by the freemen of the borough. But then in 1286 came the first of the great storms that swept away much of the town.

Erosion is a constant process. It has been going on ever since Suffolk became separated from the Netherlands perhaps as recently as 8,000 years ago. For the past 2,000 years the coastline at Dunwich has receded on average by one metre a year. In many decades the change was not obvious – higher tides simply weakened the lower section of the cliff face – but then a major storm would take away several metres of cliff at once.

There was another fierce storm in 1328, which also swept away other villages on the same coast. In Dunwich it destroyed the Benedictine cell which was an offshoot of Ely Cathedral. It swept away the Franciscans' Greyfriars priory and the Dominicans' Blackfriars priory. Most seriously the sea shifted the shingle so that it blocked Dunwich harbour, an economic disaster that forced shipping and trade to move up the coast. So it went on. In 1347 another tempest swept 400 houses, two churches and various shops and windmills into the sea. Among them was St Leonard's, a church which was abandoned soon after the Black Death swept across Europe, wiping out more than a third of the entire population. In 1510 a pier was erected as a breakwater when the sea approached the market place. The church wardens at the cruciform church of St John the Baptist sold off all the plate to raise money to build another pier to deflect the waves from their church but it went over the cliffs in 1542.

In 1644 the churches experienced a threat of another kind. A puritan reformer named William Dowsing arrived and ordered the destruction of "all Monuments of Superstition and Idolatry". Smasher Dowsing, as the iconoclast was known, was particularly down on angels and ordered the destruction of 63 cherubim in the roof and 40 superstitious stained glass windows, plus the cross on the top of the steeple. He needn't have bothered. The church went over the cliff in 1688, and the tower followed 10 years later.

Yet half a century later when Daniel Defoe made his celebrated Tour Thro' the Whole Island of Great Britain, he found that "Dunwich, however ruin'd, retains some share of trade, as particularly for the shipping off butter, cheese, and corn, which is so great a business in this county... Also a very great quantity of corn is bought up hereabout for the London market."

But it was Defoe who began the myth-making, comparing the place to the ruins of Carthage, Babylon, Persepolis or Nineveh, which latter was "so entirely sunk, as that 'tis doubtful where the city stood".

It was Defoe, too, who, indulging what Ruskin came to call the pathetic fallacy, essayed the notion that Dunwich had suffered from "a certaine peculiar spite and envie of Nature, that suffereth the greedy sea to have what it will".

It was not to be sated. Soon there was no fishing fleet, no work and the land was worthless. By the middle of the 18th century, the town had been all but abandoned. The last rector left All Saints in 1755, though the town continued to elect its two members of parliament – with people travelling to Dunwich on election day, going out in a boat to the point where the town hall used to be, and casting their vote, according to that delicious online historian of Suffolk's churches, Simon Knott.

By the time of the 1832 Great Reform Act, which abolished rotten boroughs such as Dunwich, there were just eight residents left in the constituency but they still had two MPs.

What the place never lost was its romance. Ever since, people have come to Dunwich to see or to imagine. Until the 1950s, it was still easy to find identifiable lumps of masonry on the beach. When Knott first arrived in 1985, the bones of those buried in All Saints' graveyard protruded gruesomely from the cliff. "The last remains of the Greyfriars monastery, westwards of All Saints, should be good for another 50 years or so," he estimates. But the coastal path now skirts to the landward side of the ruined priory. The local planning authorities have a policy of managed retreat; sea defences will not be built again in Dunwich.

The sea may give up its secrets – thanks to multibeam sonar techniques which send out pulses of sound that are reflected back to build acoustic images of the seabed, GPS technology that can pinpoint objects' location to within a metre, and a "sub-bottom profiler" that can spot objects buried beneath the sea bed. But the water will not relax its embrace. England's medieval greatness will remain what Defoe called "a testimony of the decay of publick things".

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