Bosses at Merlin Entertainments - the parent company of LEGOLAND has decided not to go ahead with its plans to build the major tourist attraction as part of the town's North Bay Sands development.

Instead the company says it wants to focus its investment in the USA and mainland Europe.

Scarborough Council chief executive Jim Dillon,said: "We are naturally very disappointed to receive this news from Merlin Entertainments.

"We were always aware that the locating of a LEGOLAND Discovery Centre in Scarborough was not a foregone conclusion and that Merlin were looking at other possible locations for a Discovery Centre.

"Our challenge was to make sure we did everything asked of us to make the proposal possible and we have done that. The stipulation from Merlin that the facility must open by April 2009 made it essential to make the public aware of the proposal at an early stage in order to both gauge their support for the project and also to undertake the required consultation on the planning application submitted for the development.

"We have had a dedicated team working continuously on the project for the last few months in order to do everything possible to deliver this attraction to the town and Merlin have praised the Council and developers, Benchmark, for their enthusiasm and support for the project."

Plans for the LEGOLAND Discovery Centre were first revealed last month. The attraction was expected to draw up to 300,000 visitors a year and news of the development had received almost unanimous backing from the towns residents and business leaders.

A spokesman from Benchmark Leisure, the firm behind the £150 million Sands development said: "We are obviously hugely disappointed and despite both ourselves and the council meeting every legal, financial planning and design challenge required to meet the proposed opening date of April 2009, a decision has been taken which was ultimately out-with our hands.

"However we will continue to deliver the Sands project and have plenty more irons in the fire which could sit well with the waterpark and proposals for the Northstead Manor Gardens in creating the principle visitor attractions."

Mr Dillon said he was still optimistic about the North Bay development, he said: "While we are disappointed we have to accept the decision and move forward.

"The momentum of progress on the Sands Project before the LEGOLAND opportunity arose was and remains positive and we will continue to work with Benchmark to ensure that the development is a success."