City's £500m new town is sunk

Almost 5000 new homes, schools and industrial units were to be built on the former Monktonhall Colliery site in Midlothian.

But now Miller Group, part of the Shawfair Developments joint venture with the City of Edinburgh and Midlothian councils, has exercised a "get-out" clause as a result of the credit crunch. It decided that there was no point in speculatively building new homes due to the depressed housing market.

The move is likely to mean further delays for the development, which spans Shawfair, Danderhall and Greendykes. The councils bought 500 acres of mainly agricultural land 12 years ago to create the new community.

Councillor Gordon Mackenzie, the city's finance and resources leader, said it would be difficult to attract another developer in the current conditions. He said the move would mean further delays, although they were keen to build affordable housing on the site.

He said: "We will be talking to Midlothian Council about finding another partner, but I wouldn't expect there to be any immediate moves to develop the site. There are certainly going to be delays.

"We will have to go back and look at the planning requirements for the site. There were significant planning burdens put on it which makes it more difficult to develop."

He said they could use affordable housing money from the Scottish Government to keep part of the development moving forwards.

The master plan for the site had included two schools, two office parks, and industrial estate and public transport links including a railway station.

The total cost was expected to be 100 million, with a saleable value of 500m after about 12 years.

Rhona Brankin, the Labour MSP for Midlothian, was reported as saying: "It's hugely disappointing from the point of view of the Midlothian economy. This is a really important central plank of economic development in Midlothian and was to provide high quality housing and the potential for many more jobs."

Miller had a 25 per cent interest in the project and had intended to build about a quarter of the homes, tendering the rest to other developers. The two councils have agreed to pay back the developer's investment sum, thought to be between 1.5m and 2m.

Phil Miller, chief executive of Miller Development, said: "Miller Group has been pleased to have worked closely with both councils over a number of years to advance the Shawfair development.

"Our interest in the joint venture expired at the end of October 2008 and in view of the general market conditions, we concluded we would not review our interest. The project is not viable at the present time and our involvement in the short term would not be required."