CONTROVERSIAL PLANS for a huge new container development on Southampton Water were today rejected by the government.

The decision to refuse the proposals for the £600m scheme at Dibden Bay will come as a huge blow to Associated British Ports, operator of Southampton docks.

But the announcement by the Department of Transport will spark celebrations among New Forest residents who joined environmentalists to fight the plans.

The decision was made by Transport Minister Tony McNulty, who accepted the recommendation of the Dibden Bay Inquiry Inspector Michael Hurley to turn down the scheme.

It was made in a 900-page report compiled after the year-long public inquiry into the scheme which ended in December 2002.

Hampshire County Council joined forces with the local residents, the environment Agency, English Nature and the RSPB to oppose the six-berth scheme.

Today ABP bosses were unavailable for comment and were locked behind closed doors analysing the decision. The company share price dropped by nearly 39p as investors off-loaded.

In making the announcement Mr McNulty said: "The government fully recognises the nation's and industry's needs for additional container port capacity in order to meet future economic demand, but every proposed port development must be justified on its own merits.

"One important factor in the making of this decision was the environmental impact of the proposals on internationally protected sites. After carefully considering all the arguments and impacts I have concluded that, overall, the scheme should not go ahead."

The new container development would have created 1,300 permanent jobs as well as an additional 700 jobs in the construction of the scheme.

But New Forest East MP Dr Julian Lewis, a vociferous opponent of the container terminal, said the decision was "fantastic news".

He said: "This is a lesson to all the big boys and get-rich-quick developers that however much they bluster and bluff and bully communities, they can be defeated by local opposition."

Mr Lewis added: "What we hammered home again and again in this matter was that the environmental protection which existed could be overruled on international economic grounds only if there were no alternative sites for ports.

"The key was that there were alternatives even though they had to have inquiries into them.

"This is a fantastic vindication of the campaign which the Waterside community has waged and the arguments which we have put forward.

"It also vindicates the planning process itself and it is credit to the government that it has abided by the rules of the independent inquiry and stuck by the recommendation to reject Dibden Bay."

Mel Kendal, leader of New Forest District Council, said: "There are more suitable locations arising from public inquiries that are still taking place.

"We always opposed the Dibden Bay scheme because of the environmental consequences on the Waterside.

"Today's announcement is a victory for the New Forest and vindicates our opposition to the proposal. It would have had a devastating impact on Hythe and Marchwood, which is why we fought so hard."

Phil Henderson, of Residents Against Dibden Bay, said: "I could see no justification for destroying an area such as Dibden Bay, which is covered by so many nature conservation designations.

"What's the point of having these designations if they were going to be ignored? It would have been a complete nonsense."

Hythe councillor Brian Dash said: "I'm over the moon - it's the best news we have had since 1945.

"A huge port area with all the traffic and environmental problems would have completely changed the nature of where we live."

Totton councillor David Harrison said: "It's the best news Totton has had for more than 50 years. The road and rail implications were huge."

Staff at English Nature also expressed delight at the outcome.

A spokesman said: "We were not able to reach agreement with ABP on the level of harm that the Dibden Bay scheme would have caused.

"Had the scheme been approved, we would have pored over the documents and sought legal advice if the package presented by ABP at the beginning of the inquiry has not improved."

business leaders today said the announcement will be an enormous blow to the economy of south Hampshire.

Catherine Wright, spokeswoman for the Southampton and Fareham Chamber of Commerce, said: "We understand that many local campaigners will be happy at this decision, but from the point of view of Southampton and the region's economy, this is disappointing news.

"Southampton needs to take a long hard look at where its wealth creation lies in the longer term in the light of this decision. The port of Southamp-ton goes on operating and we have no doubt that ABP will maximise the facilities that are available to them.

"However, there is little doubt that Southampton's role as a significant player in the international container business has been struck a blow.

"Countless local businesses rely on the container trade specifically and a thriving port in general for their livelihood. It is at the core of our economic prosperity on this city and throughout the south central UK region.

"There is no immediate threat to jobs, but this decision signals a shift in emphasis that is now bound to take place over the next few years as we find new ways to exploit the wealth creating energy and flair that exist in our city region."

Karen Bladen, from the Federation of Small Businesses, added: "The FSB is disappointed that Dibden Bay will not go ahead. The loss of this vital investment in south Hampshire will have a detrimental effect on the whole economy and will undoubtedly slow down the growth of new businesses."