Bristol City Council said it had abandoned the arena plans because of the large borrowing required and fears about rising costs on the project compared to another development option which would generate cash for the council.

The mixed-use scheme that will be now looked at with backer L&G could comprise 550 homes around 250,000 sq ft offices, a 100,000 sq ft conference centre and 5-star hotel.

Cllr Craig Cheney, Deputy Mayor for Finance, said: “It is the council’s duty to seek the best possible value for public money and the greatest economic benefit for Bristol and this has been central to the decision.

“We cannot ignore the evidence which shows that a mixed-use scheme on Temple Island would bring an extra £500 million in economic benefit to our city and create three times the number of jobs for the people of Bristol.”

Marvin Rees, Mayor of Bristol said: “We need to move forward now and ensure Bristol is fit for the demands of a modern, thriving and well-connected city.

“By not borrowing the huge sums needed to build the arena, we will also release capital for other exciting city projects.

Mayor pledges to build an arena one day after striking Temple Island scheme canned

“I remain committed to delivering an arena for Bristol and we will continue to work closely with our partners to make sure that we make this a reality.”

The decision is a huge blow to Buckingham Group, which signed a pre-construction services deal for the project in April 2017 replacing original contractor Bouygues who walked away from the project a few months before when its detailed costings rose to £90m from the £80m outline sum first agreed with the council.

The scheme has been on hold for more than nine months as fears grew over further cost increases.

A business case will also be developed for the re-allocation to other projects of the £53m Economic Development Fund (EDF) money earmarked for the arena project.