A £2 million project to restore a Victorian factory that has remained derelict for 15 years and create 40 jobs in Birmingham’s Jewellery Quarter has been rejected – because the plan does not fit council conservation policy.

Shrewsbury-based OE Developments has spent thousands of pounds commissioning architects to draw up proposals to breathe new life into the former Standard Works on Vittoria Street, creating a mix of new homes and a restaurant.

But Birmingham City Council says the scheme, which would generate around 40 full and part-time jobs, is contrary to the authority’s Jewellery Quarter conservation policy to “retain the industrial use of manufacturing premises” in the area.

Martin Ebelis, of OE Developments, has accused planners of “failing to live in the real world” and condemning the building – a former home of small jewellery businesses for many decades – to remain derelict.

“We are clearly disappointed, but we have gone as far as we could go. Nothing will happen to this building now – it will simply remain derelict,” he said.

“We have already spent a few thousand pounds and would have loved to have progressed this further.

‘‘The Jewellery Quarter is simply going to deteriorate further if the council sticks to this policy. Nobody is going to develop on that basis.

“I find their statement somewhat puzzling given other developments, such as St Paul’s Place.

‘‘We know that planners do not live in the real world but if they think anyone would go ahead with this development on the basis they suggest then they are perhaps on another planet.

“They do not seem to have taken into account the restaurant on the ground floor together with associated use in the basement.

“You have to accept change if you want to bring buildings back into use.

“We would create jobs with the restaurant, I would have thought about 40. This would be a £2 million scheme and we would have the funding in place.”

Philip Jackson of Jewellery Quarter-based Maguire Jackson, agents acting on behalf of the Standard Works’ London-based vendors, said: “The city runs a huge risk of losing listed buildings to neglect in the very heart of the quarter because they are increasingly unviable to redevelop.

"We know as leading agents, both commercially and residentially in the Jewellery Quarter, that live-work apartments are not attracting interest when built.

“The Jewellery Quarter is increasingly sought after as a location to live, being on the doorstep of the city, yet the local planners are doing their utmost to accelerate the decline of the area. I cannot believe there is one other area in Birmingham that is holding back development.

“It is deeply disappointing the planners cannot wake up to the economic reality of today and encourage developers who want to commit to a special quarter of the city.”

In an e-mail to the commissioned architects, Birmingham City Council senior planning officer Joanne McCallion said a residential scheme was unlikely to be successful.

She said: “The council will not normally permit new residential uses, whether by conversion of existing buildings or new build in the areas defined as the Golden Triangle and the Industrial Middle.

“I note the site falls within the Industrial Middle, therefore it is unlikely that a change of use to residential would be looked upon favourably unless it accords with policy 2.4 which relates to live-work units.

“The purpose of this part of the policy is to retain the industrial use of manufacturing premises in the Jewellery Quarter.

“The density and integrity of the surviving industrial premises within the industrial quarter makes a powerful contribution to the character of the Jewellery Quarter, as such it is considered inappropriate to permit any change of industrial or commercial premises to residential usage without being part of a mixed-use development whilst providing 50 per cent of each unit as live-work units.”