A private education company has pulled out of a £4m scheme to sponsor two city academies, following a parents' revolt at a nearby independent school it owns.
City academies cost £25m each on average to start up
Global Education Management Systems has dropped the project amid negative publicity in Milton Keynes, Bucks, where it already runs Bury Lawn school.
Parents there have threatened to withdraw their children, complaining that the institution is badly managed.
Gems said opinion on its sponsorship scheme was "not favourable".
The Dubai-based company, which runs 13 schools in the UK, had offered to put in £2m to sponsor each of two city academies in Milton Keynes.
These - run by a single Gems-appointed "superhead" - would have replaced Sir Frank Markham Community School, on the earmarked site.
Under the sponsorship scheme - designed to replace under-performing schools - central government puts up the remainder of the building and start-up costs, which are typically £25m.
Parents at Bury Lawn are angry at the school's management
The private sponsor gains a say in the running of the academy.
Gems withdrew its offer after parents at independent Bury Lawn complained when the head teacher, Mark Olejnik, was asked to leave a few weeks before the start of A-levels.
It has had five heads since the company bought it two years ago.
Milton Keynes council said bad publicity from the affair had affected the academy scheme and that it was seeking alternative sources of funding.
A spokesman described the proposal as still "relevant for Sir Frank Markham Community School", adding that "alternative ways forward" were under discussion.
A Gems spokeswoman added: "The decision was taken in light of the fact that the secondary heads in Milton Keynes have yet to be convinced of the value of the academy concept and that the local climate of opinion against sponsors from the private schools sector is not favourable.
"With regret Gems is of the opinion that it is likely to be an uphill struggle for some time to come."
She added: "Gems' decision does not diminish its overall commitment to the academy programme and it believes there is much to commend the concept."
Last month, Unity City Academy in Middlesbrough became the first since academies started in 2002 to be placed under "special measures" by the education watchdog Ofsted.
It was "failing to give its pupils an acceptable standard of education", inspectors said.
The government wants 200 academies to be established by 2010, up from 17 at present.