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Plans to move two Warwickshire colleges to the same site have been rejected.
North Warwickshire and Hinckley College and King Edward VI College had proposed creating a £60m "education quarter" in Nuneaton town centre.
The colleges had planned a "cutting edge" development which they said would be "wonderful opportunity" for young people in the town.
But the county council cabinet said it could not commit to the plan while a secondary education review was ongoing.
Council leader Alan Farnell said the colleges had needed a definite decision and the only fair answer was no.
'Very difficult'
"In making this decision we also noted the outcome of the consultation on the college's relocation, which was an almost 50-50 vote in favour and against," he said.
"Clearly this means we have to go back and look at the Nuneaton Masterplan and what our next steps are, and what will be the best regeneration option for the town.
"We understand that in the current economic climate that this will be very difficult."
The review of education is considering a number of options, which include closing one secondary school, merging two others and investing in new school buildings across Nuneaton and Bedworth.
The review will finish in July.
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