The marina plan would have created 650 jobs
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Councillors have condemned the decision not to allow a £60m marina to be built in Bridlington.
The government rejected East Riding of Yorkshire Council's proposals for a 500-berth marina due to its potential environmental impact.
The ruling was based on the amount of reclaimed land which would have been used for shops and offices.
But supporters of the scheme say it would have created 650 new jobs and attracted thousands of new visitors to the town.
Way forward
Councillor Brian Jefferies said: "This is a total disaster for Bridlington and the East Riding.
"We knew this was the key to Bridlington's future and no-one has come up with an alternative.
"Anyone who is rejoicing at this decision needs to think long and hard about what future they have condemned Bridlington to."
The council and the Yorkshire Marina Partnership have pledged to try to find a new way forward for the town.
Council leader Stephen Parnaby said: "The project was set to be the jewel in Bridlington's crown and would have created the change needed to kick-start the economy.
"But we cannot accept the town has no future.
"Over the coming weeks and months we need to re-assess how we can find a way forward - the future of our young people depends upon it."