A RIVAL proposal to Southampton's rejected plans for a container terminal at Dibden Bay looks set to get the go-ahead from the government.

The government has said it is "minded" to approve the proposal from shipping company P&O for the London Gateway port at Shellhaven in Thurrock, Essex.

The announcement is seen as a major step forward for the £700m port and logistics centre plans, which have already been recommended by a public inquiry inspector to go ahead subject to conditions.

Southampton Port owners ABP's £600m Dibden Bay plan was rejected by the government last year on environmental grounds after an epic 120-day planning inquiry.

The refusal to grant permission for the scheme, which was designed to cope with the new breed of super-ships, shocked the business community but delighted residents of nearby Hythe. The decision was widely seen as a blow to Southampton's future as a premier container port.

When fully up and running Shellhaven will be able to take half the current UK throughput of containers and will push Southampton Container Terminals (SCT) into third place in terms of numbers handled each year.

Transport minister Derek Twigg said Shellhaven was needed to satisfy demand for extra container capacity.

He said: "The government fully recognises the nation's and industry's needs for additional container port capacity in order to meet future economic demand. I am minded to agree with the recommendation of the inquiry inspector that London Gateway could help meet that demand.

"We are hopeful that the relevant parties will be able to agree on a way forward." P&O chief executive Robert Woods said: "We are delighted with today's announcements.

"The development of London Gateway Port is a great opportunity for P&O and will further strengthen our position as one of the world's leading developers and operators of container ports.

"There is a national need for more container terminal capacity in the UK. London Gateway Port will ensure that this requirement is met for at least the next ten years."

A spokesman for ABP, which jointly owns SCT with P&O, said the company did not want to comment on the announcement.