The Education Partnership, which had made an application to become the first private sector company to run a state school in Britain, will no longer be seeking the contract to manage Kings' Manor school in Guildford, Surrey.

The company is believed to have withdrawn its bid because the proposed contract did not give the private company enough of a free hand in the management of the school.

In particular there seemed to be an objection to the governing body remaining the decision-makers in the school, with the contractor taking the role of adviser rather than manager.

"We would want to be in a situation where we would be held accountable - and you can't be held accountable unless you are in control," said the Education Partnership's Chairman, James Tooley.

Last year Surrey County Council invited applications from private companies wanting to take over Kings' Manor, as an alternative to closing a school that had failed an inspection and was unable to attract sufficient numbers of pupils.

Prominent among the shortlisted applicants was the Education Partnership, which applied with the involvement of the Edison Project, a controversial company which runs state schools for profit in the United States.

Surrey council will announce the successful application next month, choosing from the remaining three shortlisted bids - Nord Anglia, the Centre for British Teachers and Kingshurst City Technology College.