Sir Robert McAlpine has pulled the plug on a regeneration deal with Torbay Council worth around £400 million.
The contractor, together with property company Deeley Freed, was named preferred bidder for the local asset backed vehicle in March.
But Torbay Council today confirmed that the joint venture partners had decided to withdraw from the scheme “for a combination of reasons”.
A council statement said the developers had pulled out because of “changing priorities within the business and the increasing uncertainties within the global and European economy”.
It said the contractor would continue to work with the council on other projects and would remain as investors in the area.
Torbay Mayor Gordon Oliver said: “Businesses are operating in a very difficult economic climate. We will continue to look at the best way to create jobs and regenerate the Bay. The Torbay Development Agency will be working through the procurement process of the LABV.”
The two year deal had been expected to deliver £400m of regeneration schemes across Torquay and Paignton.
It was designed to utilise local authority assets as a catalyst for attracting investment and improvements to the local area.
The first schemes that had been expected to be brought forward included developing Torquay’s Town Hall, Terrace car park and parts of Union Street, while in Paignton projects include the Victoria Centre, Station Lane and Claylands.