The communities secretary Eric Pickles on Tuesday turned down a £160m proposal by property investor TIAA Henderson Real Estate to convert the derelict Victorian general market and fish market buildings into shops, cafés, bars and an office block.
The plans involved demolishing the roof of the general market hall and some other structures on the site, although the developer said 70 per cent of the fabric would have been preserved.
Minister for planning Nick Boles said the benefits of the scheme “were not enough to outweigh the potential harm to an area of such historic value”.
The case was the most controversial planning decision in the City of London since the battle over tall towers such as the Gherkin, a decade ago.
The development was backed by one of Canada’s largest pension funds, Alberta Investment Management Corporation, but opposed by campaigning charities the Victorian Society and Save Britain’s Heritage.
The campaigners, working with property regeneration company Cathedral, have proposed an alternative development, which would keep the buildings intact and convert them into shopping areas like those at Camden and Spitalfields markets.
However, TIAA Henderson has refused to step aside, and has in the past vowed to leave the buildings derelict if it loses the inquiry – a threat the campaigners have called emotional blackmail.
In a letter setting out the rationale for his decision, Mr Pickles said the alternative proposal “would be possible, viable and deliverable”. He also criticised the City of London Corporation for failing to prevent the buildings from decaying.
Geoff Harris, head of development at TIAA Henderson, said Mr Pickles had been “influenced by a disingenuous campaign employed by a small minority of objectors”.
TIAA Henderson’s plans were backed by English Heritage, the City of London Corporation’s planning department, London mayor Boris Johnson and the Smithfield Market Tenants’ Association.
“Our scheme would have saved and brought back to life these Victorian market buildings that have lain empty for decades and this decision will condemn these disused historic buildings to continued decay and yet further uncertainty,” Mr Harris said.
The City Corporation owns the buildings and TIAA Henderson owns a vast basement underneath, with an option to buy the buildings if its scheme were approved. Having failed in this goal, the buildings will remain in the hands of the Corporation.
Mark Boleat, policy chairman at the Corporation, said the decision was “deeply disappointing for the developer, who has put in so much work”.
“When approving the planning permission for the Smithfield site, we felt that the new building offered a sensitive redevelopment.”
Henderson has in the past said it would use the basement as a car park if its plan was not approved.
Mr Pickles’ decision represents the second failed attempt to redevelop the western end of Smithfield.
In 2008, Thornfield Properties lost a planning inquiry over proposals to demolish the general market building entirely and replace it with a large office block.
Chris Costelloe, director of the Victorian Society, said: “These buildings are vital to the character of Smithfield and to the commercial, industrial and architectural history of the City of London. Buildings like Smithfield General Market are what make the City such a special place.”