An ambitious bid to borrow more than £1 billion for transport schemes including a new Midland Metro tram link to the Merry Hill shopping centre has stalled.

Councils in the West Midlands wanted to borrow £252 million to plug a funding gap for the £289 million extension between Wednesbury and Brierley Hill, with hundreds of millions more sought for congested motorway junctions in the region including M5 junction 2 and M6 junction 10.

Plans also involved the creation of a tram link running between Birmingham and its airport.

But in this week’s budget statement the West Midlands was snubbed in favour of pilot projects in Manchester and Leeds.

City Region project director Simon Murphy today said the news was a setback, but that he remained confident of the scheme’s long-term success. “It is a disappointment for us,” he said.

“However, in terms of the transport projects we are looking at, the budget has still allowed for talks about different ways of financing in the run up to the pre-budget report in November.”

Money for the schemes would come through a proposed loan system based on projected business rates, called Accelerated Development Zones.

The Midland Metro would expand by creating a new spur off the Wolverhampton to Birmingham route, taking passengers on a seven-mile route between Wednesbury and Brierley Hill and creating new tram stops at Dudley town centre, Dudley Zoo and Merry Hill.

Work to transform Junction 10 of the M6 would be designed to ease the flow between Walsall and Wolverhampton, while the work at Junction 2 of the M5 in Oldbury would allow more vehicles to join and leave the motorway.