The decision is a major setback for Costain, which was appointed last March to deliver detailed design and stakeholder engagement, and hoped to be in line for the construction job, once planning approval was in place.

Suspension of further work on the plans follows extensive talks between stakeholders Lancashire County Council, Lancaster City Council, Homes England, and Costain.

Funding for the road scheme and a wider programme of supporting infrastructure included £140m from the government’s Housing Infrastructure Fund. This will now be returned to the Government.

The proposed new South Lancaster to M6 road scheme would have included a new road between the M6 at junction 33 and the proposed garden village in south Lancaster, as well as a new Park and Ride on Hazelrigg Lane.

Aidy Riggott, cabinet member at Lancashire county council, said: “We’ve been working hard to try and deliver these transport and community improvements, and unlock access to the proposed Garden Village, but we’re not able to continue with the proposals in their current form.

“In particular, we’re faced with rising costs due to inflation, which would have affected how we can deliver these improvements within the current plans.”

The decision is another big blow for Costain’s Highways division, which in recent weeks has seen a host of future pipeline work withdrawn.

In recent weeks National Highways cancelled Costain’s 19-mile central reserve replacement project along the M62 over soaring costs.

It also pulled Costain from the quartet of contractors mobilising to deliver the £1.3bn A66 Northern Trans-Pennine upgrade project and is understood to have instructed Costain to now prepare to deliver its planned £1bn-£1.3bn A12 upgrade around Colchester as a joint venture rather than as sole main contractor as originally planned.

A spokesperson for Costain said: “We have been advising Lancashire County Council on their scheme in the face of funding and global inflationary pressures.

“We were contracted to work on a consultancy basis and so the Council’s decision to suspend the scheme will have no material impact on Costain or our future order-book.”