PLANS for the £130million Kingskerswell bypass are back in limbo.

The scheme failed to win immediate Government funding yesterday.

Instead Torbay Council and Devon County Council were told to go away and do more homework on the project.

But — if they are successful with any resubmitted proposal — they will have to compete against almost 60 other transport schemes for a limited funding pot.

Today business leaders said it was a "blow, but not fatal" for the long-awaited road.

And councillors questioned what more work could be done to save the scheme from the "life support" list.

Yesterday's announcement by Transport Secretary Philip Hammond (pictured) will mean more work is needed on the South Devon Link Road project before it will even be allowed to bid for a share of £600million, which up to 56 schemes could be fighting over.

Kingskerswell is among 34 schemes which will be subject to further analysis, to be carried out by the New Year to decide if they can join a further 22 schemes, which will all be vying for the £600 million fund.

While officials said the project has not been rejected, it makes the likelihood of netting funding a remote prospect given the high-cost nature of transport schemes.

This is highlighted by the £1.6billion set aside for the seven local authority schemes given the go-ahead by Mr Hammond yesterday.

A further £2.6billion was approved for nine motorway schemes.

Together with the eight schemes already announced by the Chancellor it means a total of 24 projects overall will go ahead with funding.

The announcement comes after the Department for Transport saw its building cash slashed by 11 per cent in real terms in the Government spending squeeze.

The future of Kingskerswell, which is seen as critical to the struggling local economy, has been in waiting for the Whitehall spending review, that ushered in a raft of cutbacks totalling £81billion.

Both Torbay and Devon councils have been working together on the project, which is seen as a top priority and has cross-party backing.

Teignbridge Council leader Cllr Alan Connett likened the announcement to the road being put on a "life support machine".

"After all the work over the last few years what further information could civil servants want that Devon and Torbay councils haven't already supplied them with?" he said.

"I hope that the Government are very clear about what is needed, otherwise this is just going to drag out the process which has already taken up a lot of time, money and effort.

"On the other hand, the Government hasn't said no — so there is still hope."

Nick Bye, mayor of Torbay, said: "We're still on a list of some sort but this is not the news we were hoping for.

"We will be in contact with our colleagues in Devon to see what funding is available later. We have to look at what might be on offer.

"It's not all over until the fat lady sings but it is discouraging."

Barry Buxton, chairman of the Chamber of Commerce in Torquay, said the news was a "blow but not a fatal blow" and said it was important not to think it is "doom and gloom" for the link road.

He said: "I am disappointed. It is a setback for the community and for the business community.

"We have got to take the view that on the medium term, it will not happen. It is a blow but not a fatal blow.

"On a positive side, The government is not picking on Torbay. It is just a result of a national problem.

"We made a good case for the link road. There is not much more we can do by going back to the drawing board.

"We have got all to play for."

Alan Archer, chairman of the Torbay Business Forum, said: "We should not give up on it.

"This is not the worst news we could have had but it is certainly not the best.

"We have made a good case in Torbay and we will continue to support all efforts to get a link road for Torbay.

"I do not think that this decision is a reflection on the level of confidence in Torbay but on cutbacks we are facing nationally."

Poor transport links in South Devon have long been seen as a barrier to inward investment and jobs. And the bypass is widely recognised as key to unlocking the Bay's economic potential.

In bidding for a share of the £600million, councils will be challenged "to consider the cost, scope and possibility of local funding when bidding".

The Government says the competitive process will ensure the greatest possible number of schemes, providing the best value for money, will be able to proceed.

Mr Hammond said: "While we have had to make some tough choices, I am pleased that spending on transport was treated as a priority for the Government in the spending review.

"This Government sees transport as a key driver of growth nationally and in the regions.

"So I am delighted to be able to give the green light to 24 new transport projects and a fund worth more than £600million for many more schemes to bid for."

Newton Abbot MP Anne Marie Morris asked the House of Commons for an explanation on why the Kingskerswell bypass did not meet the criteria.

She said: "Not only my constituents but constituents in Totnes and Torbay will be disappointed because value for money is not there.

"We would like to know the criteria set out by the minister and the Treasury so we can make the right representation."

Mr Hammond replied: "It's not that the bypass is not value for money. It is just that the department does not have a current appraisal of the scheme."