The plans would have seen a new sewage works built on Honey Hill, near the village of Horningsea, just outside Cambridge.
According to a 2023 consultation leaflet, it would have been a 22-hectare (53-acre) “integrated wastewater and sludge treatment plant”.
The tallest structure would have been a chimney stack up to 24 metres high, with two anaerobic digesters no bigger than 20 metres. Earthworks and trees would have encircled the plant.
Anglian Water said the decision to pull funding was “disappointing” and that its teams were “reviewing all options to increase capacity to support growth at our existing treatment works in Cambridge”.
However, the news was welcomed by Catherine Morris, who helped lead the Save Honey Hill campaign and said the group was “absolutely thrilled” after years of fighting the new development.
In a statement, MHCLG said: “It is vital that taxpayers’ money is used responsibly, and cost projection increases have made the relocation proposal unaffordable, with the additional £400m now required beyond the budget available.
“We are committed to ensuring Cambridge has the housing and water infrastructure it needs to reach its full growth potential as we deliver on our Plan for Change.”