The major event, which is in its 24th year, was to be held in the Spa Grand Hall on Saturday, December 11. Last year's event was replaced with a 'virtual' online concert during the height of the pandemic.
Organiser Nigel Wood said: "We’ve taken the advice and we’ve made an informed decision that in view of still lots of uncertainty that due to the costs and insurance we felt that the Festive Spectacular at the Spa this year isn’t viable."
In its place, a Festive Spectacular Community Carol Sing will take place on December 11 at 7.30pm at St Mary's Church on Castle Road.
"It will give everyone the opportunity to come together as a community and sing a lot of carols," Mr Wood said.
The carol sing will feature Coast and Vale Academy Children's Choir, Celebration Brass and Eleanor and Libby Wood.
The event is free to attend and there will be a free-will offering as people leave to raise money for Scarborough Salvation Army, Westway Open Arms project's food banks and The Rainbow Centre.
Since the inception of the concert in 1998, £91,000 has been distributed to many local charities.
Mr Wood said it is hoped that the borough's Mayor, Cllr Eric Broadbent, and MP Robert Goodwill will attend.
"We haven’t made this decision lightly. It’s a decision over the last few weeks we’ve thought long and hard about.
"We do appreciate that many people will be disappointed that we’re not doing it at the Spa this year, but people’s safety is paramount," he said.
Mr Wood said that they could not afford the insurance cost if they were forced to cancel last-minute at the Spa, a cost which they will not have at St Mary's and they can play outside if necessary.
More information will be released nearer the time and Mr Wood said that the Festive Spectacular is already booked for its 25th anniversary at the Spa on December 10, 2022.