The UK’s largest regeneration scheme has lost £250 million of government funding after it cancelled plans to buy a large plot of privately owned land.

The Old Oak Park Development Corporation (OPDC) announced on Friday that it no longer intends to buy the Car Giant site in west London.

The Mayor’s regeneration scheme aims to build more than 25,000 homes in Acton over the next 30 years.

Prime Minister Boris Johnson started the project in 2015, when he was Mayor of London, to take advantage of the planned HS2 and Crossrail station at Old Oak Common.

But flats will no longer be built on a 54-acre plot owned by the Car Giant dealership.

This site made up around 20 per cent of the total regeneration area, and would have provided at least 2,500 homes.

The OPDC considered using compulsory purchase to force Car Giant to sell.

But the corporation said “rapid increases” in land value meant development was no longer viable, and a spokesperson said they will not seek to acquire the plot “for the foreseeable future”.

The scheme will instead focus on building homes on HS2 and Network Rail land near Willesden Junction.

But the u-turn means £250 million of government money, dependent on developing the Car Giant site, has been lost.

The OPDC is currently discussing alternative funding with the Government, but it is not yet clear how the scheme will be paid for.

Conservative London Assembly member Susan Hall said it was “disappointing” to see the project “go back to the drawing board”.

She said: “We will have to wait to see the full details of this new plan and what it will likely achieve for the area, but the loss of this land means the regeneration may not create as many new homes and jobs as originally hoped.”

“We warned the Mayor that this project was in troubled waters and asked him to step in to help the OPDC reach an agreement with Car Giant, but sadly Sadiq Khan failed to act.”

But OPDC chief executive David Lunts said the scheme still had huge potential.

He said: “The regeneration of Old Oak and Park Royal remains one of the biggest opportunities in London and our change in approach in no way undermines the ambition to deliver the scale of change and growth that the area offers for local businesses, communities and the wider London economy.”

Car Giant owner Geoff Warren said he was “delighted at this change of approach”, and looked forward to working with the corporation.

He said: “Car Giant is a hugely important and thriving business and we have significant plans to grow our car processing plant.”