Communities secretary John Denham has refused planning consent for a £150m mixed-use redevelopment of Lancaster's Canal Corridor North, following a public inquiry.

London-based urban regeneration Centros is behind the Castle View scheme, which was approved by Lancaster City Council (LCC) in October 2008 but was later called in by Hazel Blears in February 2009. However, Denham has rejected the plans due to concerns about the evidence for removing some buildings located on the site, as well as the amount of retail floor space earmarked for the early years of the scheme.

Plans feature six public spaces, including a new park leading to the city's canal, new canal-side restaurants and cafés and major improvements to the Dukes and the Grand theatres, as well as new premises for the Musicians' Co-operative. LCC's planning committee chair, Keith Budden, said: "While it is disappointing that planning permission for the scheme has been refused, the report and the secretary of state's decision give the council a clear position on the type of development which will be acceptable on the site in the future.

"The decision totally vindicates the council's decision to appear at the inquiry and make the case for a positive steer about the development from the secretary of state." A Centros spokesperson added: "We will now consider the secretary of state's decision and the inspector's report in detail and work with Lancaster City Council to devise a strategy to realise the successful regeneration of this important site in the heart of the city centre."