Southampton'S port director has issued a stark warning that "tough choices'' will have to be made following the government's refusal to give the go-ahead for a container terminal at Dibden Bay.

The development was seen by Associated British Ports (ABP) as the way to expand the city's docks and to secure the future of Southampton's container trade, which is not only vital for the region but the national economy.

ABP has said the group does not intend to appeal against the decision but said that the ruling will hit Southampton's prosperity.

Andrew Kent, Southampton port director, said: "The government has decided that the port of Southampton will not expand and we have finite boundaries and, of course, we will make the best use of that area but at some stage in the future there will be some tough choices to make.

"I am not going to be all doom and gloom but at the same time I am not going to pretend that life will carry on without some changes and not all those changes will be welcome for the city and the region. It is my judgement this is a bad decision by the government in that it takes almost no account at all of the strategic needs of the region or the national economy.

"The decision on this application has now been taken, what we now have to do is to look forward and emphasise all of the positive aspects of the port and its contribution to the economy.''

Following a year-long public inquiry into the proposals the government rejected the plans on the grounds that the environmental impact on internationally-protected sites would be too great.

"I was not angry when I heard the decision but rather sad and disappointed more for the businesses and the thousands of people whose future depends on the port of Southampton,'' said Mr Kent.

"Dibden Bay is land created by the port for long-term future development and it still remains port land. The inspector in his report stressed that the decision was very finely balanced and indeed that another man reviewing the same evidence might make the opposite decision.

"As to the future, who can say. In the meantime the land at Dibden Bay will continue much the same as previous years and be used for rough grazing."