The Co-op has said this is not the end of its dream to build a Leicestershire eco-town.

For the past two-and-a-half years, Co-operative Estates has been planning for the 15,000-home Pennbury development.

However, it failed to get on to a short-list of four sites named yesterday as Britain's first eco-towns.

Co-op's head of planning Ruaridh Jackson said: "This is what we were expecting. We have made clear we want to work through the planning process.

"We have never had a planning application in a drawer. We are not ready.

"The Harborough local plan offers a need for 2,500 homes in our area and we have made it clear it would be the first stage of realising an eco-town."

The Government says that in order to be successful, eco-towns should have the backing of their local authorities.

To reapply, the Co-op would have to change its plans and probably get acceptance from those who previously opposed it.

Mr Jackson said: "The county council made it clear they were unsure about transport and economic issues. That's something we would work through with them."