A partnership deal to redevelop East Cleveland has suffered a new setback.

Redcar and Cleveland Council this week announced that Amey Plc is no longer the preferred bidder in a massive £220m development programme.

That means it is back to the drawing board for tendering for a strategic partnership which would, among other major projects, provide a new £45m school.

The council's second choice, Liberata, will be back in the running and Amey must make a second bid.

The council stressed that the decision was not based on national speculation about Amey's finances. Instead the council said the problem was caused by 'significant features' of the original Amey plan having been proved to be unachievable.

The deal had held out the prospect of a £45m PFI bid for a 1,100-place new building for the Freebrough Community College based in Skelton, Loftus and Brotton; a new town hall; new business centre;new information technology and 600 new jobs.

Amey would have provided essential council services but also been able to tender for other council contracts up and down the land.

Steve Kay, leader of the East Cleveland Independents, was particularly concerned about the potential set-back to a new Freebrough College.

He said: "People's hopes were built up over a new city academy which never happened and now there are these difficulties with a new school.

"Each time there seems to be difficulties and delays. The new school must go through by hook or by crook."

David Walsh, council leader, said the council had to be sure to have the right deal.

He said: "We must ensure that any contract we enter into is consistent with the council's obligation to secure best value. The step we have taken in drawing the reserve bidder back into the process is an essential part of achieving that."

Chief executive Colin Moore said: "This is a very big contract and we have to take the time to get it right."

A spokesman for Amey said the company accepted the decision but remained fully committed to the project.

"We are looking forward to working with Redcar and Cleveland Council in the future," she said.