Multi-million pound plans to redevelop Southampton’s waterfront could be delayed – because of a decision made on the Isle of Wight.

The planners on the island rejected an application from Red Funnel to build a new terminal and marshalling yard at East Cowes.

The refusal could have a knock-on effect on the ferry firm’s plan, already approved, to move its Southampton terminal to Trafalgar Dry Dock in the Western Docks which would free up land for the £450 million Royal Pier development.

Red Funnel has secured £15 million of government funding, through the Solent Growth Deal, to pay for infrastructure on the roads around both Southampton and East Cowes terminals.

Company chief executive Kevin George said: “It makes no sense to have a large terminal in Southampton and a constrained terminal in East Cowes. We would consider downscaling our plans in Southampton.”

He said a rethink over the size of the new Southampton terminal plans could delay the relocation, set for the end of 2017.

City council leader Simon Letts, pictured above, urged Red Funnel not to revise its plans in Southampton for £33.5 million Southampton terminal complex which includes new berths for Red Funnel’s fleet and a 357-space four-deck multi storey car park which woud “improve the passenger experience”.

“It would be a poor decision to scale back on the basis a decision made on the Island,” Cllr Letts said. “If I were Red Funnel I would be putting my energies into appealing the decision.”

He also claimed the Royal Pier development, which could eventually include 730 homes, 50 shops, and a range of offices, bars and restaurants, could start independently of Red Funnel’s.

However, Cllr Letts warned Red Funnel could be at risk of losing government funding for the infrastructure if the schemes were delayed.

Member of the Isle of Wight Council planning committee rejected East Cowes application amid concerns it could lead to the loss of valuable marine industry jobs in the area.

Businesses located on the waterfront at Venture Quays, had claimed they had nowhere else to go on the Island if the plans were approved. One of the firms affected was tidal energy specialists Sustainable Marine Energy which employs 30.

The firm’s project manager Dave Stoddart-Scott, who also organised an on-line petition opposing the scheme, said he was delighted with the council’s decision.

“Red Funnel’s ‘regeneration’ plan would have resulted knocking down buildings containing jobs and replacing them with a car park,” he said.

Mr Stoddart-Scott said he would like the ferry firm to come back with alternative plans which worked for the whole the community. Red Funnel claimed the £6.5 million scheme would have created up to 200 jobs and create a “better gateway” to the island.

Mr George said: “Red Funnel is understandably disappointed that the planning application for this once in a lifetime opportunity has been refused by the committee.

“The East Cowes regeneration scheme, which was fully funded and in line with the Isle of Wight Council’s planning policies, was recommended for approval by planning officers and would have brought a wealth of benefits to East Cowes and the wider economy. We will now consider the options available, based on what we’ve heard.”

He said the firm would be analysing the whether or not Red Funnel would be lodging a planning appeal.