A CONTROVERSIAL £135m scheme to rebuild a Hampshire city centre is facing a fresh setback.

Eric Pickles, Secretary of state for Communities and Local Government, approved a compulsory purchase order (CPO) in March to allow developers to secure land and start work on the Silver Hill shopping development in Winchester, But London & Henley, which owns part of the site, has launched a legal challenge against that decision, which could end with permission being overturned.

The city council and developer partner Henderson Global Investors confirmed it was aware of the challenge, but that work on the £135m scheme could begin as the CPO remains valid.

Martin Perry, director of retail property development at Henderson, said: “We are still 100 per cent confident and do not expect to have to change our plans or timelines.

“It’s understandable in a process like this London & Henley would seek any legal route available to them to stop the compulsory acquisition of their land and we just have to deal with that.

“The CPO was confirmed and is valid so it does not stop us; we can go forward and take the land.”

Council deputy leader Rob Humby said the council would meet Henderson in two weeks when leader Keith Wood, who is currently away, returns.

It is unknown how long it will take for the challenge to be heard.

London & Henley was among several businesses to oppose the scheme at a public inquiry last September, and also had its own vision for redevelopment of the site rejected.

The redevelopment covers six acres — around a quarter of Winchester city centre — and its proposals include shops and flats around a network of streets that link Friarsgate and the Broadway.

There will be a new public car park and bus interchange. It will replace the existing surface car parking, the bus station, and buildings from the 1950s and 60s.

London & Henley was unavailable for comment.