Plans for a £27 million city academy are in tatters after the multi-millionaire sponsor backed out.

Jon Aisbitt decided to withdraw from the development which would have seen Falmer High School, in Lewes Road, Brighton, turned into a flagship education centre focusing on business and enterprise skills.

Mr Aisbitt, an investment banker who is one of the richest men in the country, had pledged the £2 million which was necessary for the bid.

If the plans had been approved the Government would have contributed between £10 and £25 million to the proposed Falmer Academy.

A spokesman for Brighton and Hove City Council said: "Everyone, including Mr Aisbitt, councillors, officers and the school, has worked extremely hard to make the new vision for the school into a reality.

"The council remains, as it has always been, totally committed to Falmer High. The school's most recent Ofsted Inspection report praises the school's continued improvement and cites many good aspects of the school's work.

"The council will be actively seeking a way forward to secure future investment in the school to ensure that the children and local community continue to benefit from this improving school."

Mr Aisbitt said the reason he had withdrawn from the development was that he believed there was a high likelihood that a fully costed proposal acceptable to both parties would not be agreed in an acceptable timeframe.

He said: "We began the feasibility study for the Falmer Academy in April 2006 with a target date of signing a binding agreement to go forward with the academy in 2007.

"It took us until August 2007 to obtain a proposal from the council for a site for the academy, within the grounds of the existing school, which was acceptable to the Government's academies division.

"We set a new target for signing everything for April 2008 - a year later than the original timetable. The council has now made it very clear that it is not going to be in a position to honour that deadline."

He added that he had only the highest praise for the commitment of Stuart McLaughlin, the principal at Falmer High.

If the proposals had gone ahead the school would have been state-funded but run outside local authority control by the sponsor and would not have had to follow the national curriculum.

The scheme was controversial and critics last night spoke of their relief that the deal had fallen through.

Ben Duncan, the Green Party spokesman for children, families and schools on the city council, said: "This is excellent news, for the present and future students at Falmer High, parents, teachers and the community.

"It would have meant handing control of the school to the Government and a local businessman, removing it from Brighton and Hove's portfolio of fully maintained schools, and risked reversing the excellent progress the school is making in terms of results and behaviour.

"It also raised questions over the future of the Swan and Bridge community centres for children with special educational needs and meant selling off school playing fields for a multi-storey car park and leaving nearly a £12 million funding blackhole for the council."

Vanessa Brown, the council's lead member for children's services, said: "We are very sorry that Mr Aisbitt has withdrawn after showing such support and commitment to both the Falmer School and to the academy programme.

"We remain 110 per cent in support of Falmer headteacher Stuart McLaughlin and his team and the improvements that he has led in the school."

Pat Hawkes, Labour Party spokeswoman for children's services, said: "We support Falmer High School and Stuart McLaughlin in its need for improved facilities.

"With the two universities and the football club on the doorstep, we want the council to urgently talk to all of these bodies so that the work so far is not wasted and so that the north Brighton community can end up with the kind of facilities that an Aisbitt-backed academy would have brought without much slip to the timescales."

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