The “failed” regeneration project that turned Sheerwater into a “ghost town ” will be paused until further notice.

Woking Borough Council has agreed to end its agreement with ThamesWay and ordered the debt-ridden council-owned firm to stop working after it finishes the homes currently under construction.

The council said it would instead look for external partners, such as housing associations or the private sector, to take on any further development projects in the town.

Councillor Will Forster said the borough was forced to introduce the measures as part of its bankruptcy-enforced spending freeze but pledged to work with the community to see the project over the line.

He said: “There is so much anger in the Sheerwater community towards this council. We have failed that community. We have not taken them with us on that Sheerwater regeneration. The scheme felt like it was done to them, not for them.”

In 2018, Woking Borough Council began to move residents out of the town as it began to demolish about 500 homes and build 1,142 new properties with improved infrastructure.

It was to be delivered over nine years by its own company, ThamesWey, on the back of cash from the Public Works Loans Board.

In the aftermath of the council’s financial meltdown, it emerged its company was £185million in debt, with a peak debt at the end of the regeneration project expected to climb to £361m.

Completing the work already started, the council was told, would already require an additional £80m in borrowing.

The borough is presenting a case to the government that it is better value for money to build the homes rather than have them unfinished and empty.

Cllr Forster said: “Back in 2017, this council embarked on the Sheerwater regeneration scheme.

“I think it’s safe to say it’s been a controversial, costly and a complicated scheme.

“Whether you were a cheerleader for the original scheme, wanted a smaller scheme or opposed it completely, there’s one thing we can all agree on – we need to face reality, the previous scheme as outlined is no longer affordable.

“We can not keep borrowing money to pass on to ThamesWey for them to roll out the Sheerwater regeneration scheme.

“We can’t put more debt on future generations in Woking to pay.”

How the project moves forward will be decided in the autumn, pending a review and resident consultation.

Possible ideas include refurbishing homes rather than demolishing them to make way for new houses.

During this time, the council has agreed to compensate affected residents on a “case-by-case basis”.

The council said it remains “committed to delivering a regenerated Sheerwater and will be seeking the views of the local community over the coming weeks on how best to achieve this” and that it was “aware of the ongoing disruption, concern and uncertainty faced by those in Sheerwater and is committed to providing clear answers around the future of the area at the earliest opportunity.”

Councillor Saj Hussain (Con, Knaphill) said it was “imperative we continue with the regeneration programme.”

Councillor Tahir Aziz (Lab, Canalside) said: “My biggest concern is the continuous suffering of the residents, the large number of Sheerwater residents living in this construction site. The infrastructure has not been repaired. There’s been no investment in infrastructure for the past ten years.

“There is always an excuse - the people are living in a terrible condition.”