Lancashire County Council has to return £140m to the Government after suspending further work on the proposed South Lancaster to M6 transport project.
The authority said would 're-evaluate the proposals’ after rising costs increased the risks on the public purse.
It has committed to returning the £140m it secured for the road scheme and a wider programme of supporting infrastructure from the Housing Infrastructure Fund.
Last year Costain was awarded an early contractor involvement contract on the scheme and its analysis helped demonstrate that the funding mechanisms would no longer be sufficient.
A spokesperson said: ‘We have been advising Lancashire County Council on their scheme in the face of funding and global inflationary pressures. We were contracted to work on a consultancy basis and so the council’s decision to suspend the scheme will have no material impact on Costain or our future order book.’
The proposed new South Lancaster to M6 road scheme was part of the Lancaster South Growth Catalyst project and would have included a new road between the M6 at Junction 33 and the proposed garden village in south Lancaster, as well as a new Park and Ride on Hazelrigg Lane.
Lancs CC said the decision to suspend work follows extensive discussions between partners and Homes England as part of work to develop the scheme, along with design and engineering considerations.
It added that overall the aim is still to develop plans for this part of south Lancaster, create sustainable communities and unlock long-term traffic issues.
Aidy Riggott, cabinet member for economic development and growth, said: ‘We've been working hard to try and deliver these transport and community improvements, and unlock access to the proposed Garden Village, but we're not able to continue with the proposals in their current form.
‘In particular, we're faced with rising costs due to inflation, which would have affected how we can deliver these improvements within the current plans.’
Phillip Black, leader of Lancaster City Council, said: 'I am pleased that the county council and Homes England have taken the sensible decision to suspend and re-evaluate plans for South Lancaster in light of inflationary pressures and rising costs.
‘However, as a government planning inspector recently acknowledged, there is an overriding need for housing within the Lancaster district. All parties involved recognise that the South Lancaster area still has a part to play in meeting this housing need in the future, but now is the time to evolve our strategic vision of housing developments in our district.’
Pauline Schaffer, director of infrastructure funding at Homes England, said: ‘We have been working with Lancashire County and Lancaster City Councils for several years on this project and appreciate the challenges it has faced and the position that has been reached.'
