One of Birmingham's oldest metal-bashing firms claimed it had moved a step closer to extinction last night after the City Council threw out a multi-million pound rescue scheme.

Planning committee members rejected an application by A E Harris to demolish its historic Jewellery Quarter premises and build flats, shops and small industrial units on the site.

The decision means that the firm cannot now sell the Northwood Street site for redevelopment and will no longer be able to afford to relocate to new premises on an industrial estate on the outskirts of Birmingham. A E Harris, which has operated in Birmingham for 125 years, has consistently warned that it is likely to go out of business with the loss of 60 jobs if it is unable to move to a smaller and less costly site.

The firm fell foul of a council development plan, which resists house building in the so-called Golden Triangle industrial heart of the Jewellery Quarter.

A E Harris chairman Russell Luckock accused councillors of "not being interested in manufacturing".

Mr Luckock pointed out that 93 component manufacturers in Birmingham and the West Midlands had gone into receivership or administration so far this year and he feared A E Harris could follow them.

"The plain fact of the matter is that in order to streamline our operation we have to cut costs and move into some-where better and new. I just don't know what we can do now.

"I can't afford to appeal against this decision, and anyway what's the point?"

The committee rejected the A E Harris application by six votes to five, with two members abstaining.

Council planning officers have been negotiating with A E Harris for more than a year and believed they had devised a compromise proposal that would be acceptable to the committee.

The firm's application, regarded as one of the most controversial in recent years, split conservation groups. The Civic Society backed the company's proposal, but the Victorian Society wanted it turned down.

The committee rejected a plea in favour of granting planning permission from two senior council officials.

Planning director Clive Dutton and assistant director Phil Crabtree said there were exceptional reasons why the firm should be allowed to redevelop the site.

Mr Dutton said the A E Harris operation was noisy heavy industry, which was out of keeping with the Jewellery Quarter's designation as a centre for small firms. The redevelopment being proposed would make far better use of the land.

Mr Dutton added: "There is the strongest possibility that the company, without a positive decision, could well fold. Any further delay could accelerate that."

Mr Crabtree said: "This is a metal-bashing business. It needs to relocate to survive a nd retain its existing employment.

"If that doesn't happen there is the real possibility that the company will be lost and the jobs will be lost."

There was no reason to believe that by granting the A E Harris application the committee would set a precedent, Mr Crabtree added.

Several committee members doubted the validity of A E Harris's warning that it could fold.

Coun Mike Nangle (Lab Hodge Hill) said: "They are holding a gun to our heads."