The leader of Birmingham City Council, Mike Whitby, is fond of pointing out that regeneration in much of the country may be in the doldrums, but here things are booming despite the credit crunch and recession.

He has a point, since Birmingham finds itself in the fortunate position of having on its books a number of important projects funded almost entirely by the public purse.

New Street Station, the Queen Elizabeth super hospital, the new library and the Highways Private Finance Initiative are all going ahead and will help in their own way to transform the city. An announcement of approved government funding for the Metro tram extension from Snow Hill to New Street is expected shortly.

As far as privately-funded regeneration projects are concerned, a very different picture emerges. Work has stalled on the Snowhill scheme and there is precious little sign of anything happening at Arena Central and the V Building, or the British Land Tower in Colmore Row.

Privately-funded development schemes need help at the moment if they are to prosper, none more so than the vast £750 million project by St Modwen to transform the former MG Rover works and adjoining land at Longbridge.

This is important, not just for the 10,000 jobs that eventually will be created but also for Birmingham to prove that it can deliver a sustainable modern community in a part of the city that has suffered more than its fair share of economic woe.

It is disappointing, therefore, that a dispute between developer St Modwen and the city council over Section 106 payments and an infrastructure tariff has reached the stage where the two sides cannot reach a compromise and matters are to be thrashed out at a public inquiry.

It is possible to feel sympathy for both the developer and the council. St Modwen, indisputably, is facing financial difficulties and will not be making as much profit in the short to medium term from Longbridge as had been predicted before the recession.

The council, on the other hand, has been forced to play hard ball precisely because of the recession. If St Modwen is unable to meet its £35 million Section 106 commitments in full, who then will pay for the infrastructure required to complete the Longbridge development?

The local authorities involved in the project – Birmingham City Council, Worcestershire County Council and Bromsgrove Council – are unlikely to have spare cash to hand to provide roads and public transport links for Longbridge.

Birmingham planning committee chairman Peter Douglas Osborn has warned that progress at Longbridge, and job creation, may simply grind to a halt if a way cannot be found around this financial stand-off.

He is right to speak out so frankly, and to point out that the council has offered St Modwen a number of easy-terms payments.

It may not be too late, even now, for heads to be knocked together and for an agreement to be brokered. But if the matter does go to a public inquiry on a point of principle, it is difficult to imagine that this will be anything other than damaging for Longbridge.