Communities secretary John Denham has refused the controversial plan by Centros to redevelop Lancaster's historic core, but the decision has left both sides feuding over future use of the area.
The plans for retail led development of Lancaster's 8ha Canal Corridor North site achieved national controversy with the developer and Lancaster City Council pitted against English Heritage and SAVE Britain's Heritage.
In a bizarre twist, the developer withdrew from the public inquiry, leaving the Council to present the case for the development.
The decision delighted conservationists who pointed out the scheme would demolish 30 historic buildings to make way for a shopping centre, destroy 18 buildings in two conservation areas and eradicate an historic street pattern.
SAVE said the scheme was completely wrong for such a sensitive and finely textured site.
"This is a battle not just for Lancaster but historic centres all over Britain which are threatened by a backwards move to 1960s shopping precincts which kill off local shops and deny local people the use of real historic streets," said SAVE president Marcus Binney.
He said the Council should stop supporting such schemes and bring forward a conservation-led proposal for the area.
But that still looks beyond the Council's willingness to move and it said the refusal was primarily based on concerns about "evidence for removing some of the buildings on the site, and the amount of retail floor space in the early years of the scheme".
It said the area needed regeneration and the scheme's overall sustainability had been accepted.
"We run the risk of falling behind other towns and cities in the North West," said planning committee chairman Keith Budden.
It said it would work with Centros on a revised scheme, based on the inspector's recommendations.
SAVE has meanwhile begun legal proceedings to prevent Mitchell demolishing its historic brewery on part of the site which lies between the two conservation areas. The boundaries are presently being reviewed.
