Locals said the news was 'sad' and 'very frustrating'
Plans to revamp Weymouth seafront in time for the 2012 Olympics have been dealt a "devastating blow" after agreed funding was withdrawn.
The South West Regional Development Agency (RDA) had said in September it would give £6.6m towards the Esplanade Regeneration Project.
But the body has now withdrawn funding blaming "pressures on its budget".
The council criticised the RDA for going back on its agreement, but vowed to salvage what it could of the scheme.
Weymouth and Portland are due to host the sailing events for the 2012 Olympic and Paralympic games.
Last November, the £15m sailing academy complex was unveiled which had included funding from the South West RDA.
Weymouth and Portland council believed the Esplanade Regeneration Project would have created 180 jobs and boost the town's economy by £4.8m a year.
Councillor Michael Goodman said: "We are bitterly disappointed at the decision of the South West RDA to renege on the agreement to part fund our vital seafront regeneration project.
The project planned new beach rescue and tourist information buildings
"A great deal of work by our own staff and that of potential partners has been wasted as result of the late and total withdrawal of funding.
"I am just grateful that we were able to gain the South West RDA's support necessary to regenerate Osprey Quay, before the funding tap was turned off."
The project was to include new beach rescue and tourist information buildings, and five new focal points to link the seafront with the town centre and harbour areas and give a greater priority to pedestrians.
Also, there were plans for a lighting scheme to bring the Victorian lights along the seafront back into use alongside the promenade's Victorian shelters.
Jane Henderson, chief executive of the South West RDA, said: "Like most businesses and families throughout the region, we have had to tighten our belts and will not now be able to fund all the investments we hoped we could.
"None of these choices has been made lightly, and we regret the disappointment that will be felt by some of our partners and stakeholders."
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