A Black Country regeneration project launched to global acclaim in March has become a victim of the recession after regional development agency AWM pulled its funding.

The Darlaston Strategic Development Area (SDA), a proposed 54-acre business park which could have brought an estimated 2,500-4,500 jobs into the area, has seen its funding cut for the next two years

The SDA was part of a huge scheme intended to transform Walsall, including the £400m Gigaport project. Darlaston is the only part of the project to have been put on hold.

The scheme is run by the Walsall Regeneration Company, headed by chief executive Dr Peter Cromar.

When WRC visited the MIPIM festival in Cannes, representatives said the reaction to Walsall regeneration from international visitors had been very positive, with the Darlaston scheme described as potentially nationally important.

The first stage of the Darlaston regeneration project – a £500,000 pilot remediation study on the former IMI James Bridge copper works that take up part of the site – is already underway and will continue.

But AWM said the rest of the project was effectively on hold while the agency focused its funding on the most important projects.

AWM had to re-evaluate all the projects it was working on after the government cut its funding by £50m and income from property receipts dropped by more than £20m because of the recession.

It has cut the funding to 122 projects in the region. Although it has not identified which ones will lose out, it said money for business support had been increased, and key regeneration projects like New Street Gateway, Longbridge and Eastside all had their budgets ringfenced.

Mark Foley, partnership director at AWM, said the agency had had to make tough decisions about which projects were the most important to keep going. He said: “In effect the Darlaston project has been put on hold because there’s no significant investment on that site for the next two years. But in terms of Walsall and the Black Country it isn’t about this scheme going ahead, it’s about other schemes.

“The decision was taken on the basis that there are other more significant schemes in that area. The SDA scheme is more of a long term one. It’s a large site and it’s an important site, but when you look at the things you can do in West Bromwich or Walsall those are things that can go ahead immediately and can support jobs or local industry right away.”

Dr Cromar, of WRC, described the funding cut as “a setback, but only a temporary one”. He said the copper works study would be finished by Christmas, putting the site in a good position to start up again when the economy improved.

He added: “Regeneration is a long ball game and has to be viewed in that context. Walsall’s regeneration in the meantime takes great strides forward. The new Walsall College, part-funded by AWM, will open for learning in September. The Walsall Waterfront scheme, again part-funded by AWM, is also progressing with a start on site this year.

“The bigger picture is that Walsall’s re-emergence as a thriving town playing a key role in the Black Country and West Midland economies is on course. The new Manor Hospital will also be completed in 2010.”