A £300 million shopping centre in the Black Country has been officially scrapped – as it emerged traders whose livelihoods have been blighted by the failed project may be in line for compensation.

Businesses set to be bought and demolished to make way for Summer Row, Wolverhampton, have been in limbo for years. They say trade plummeted as neighbouring shops shut because parts of School Street, Worcester Street and Cleveland Street were supposed to be demolished.

Wolverhampton City Council scrapped the scheme after about seven years work because bosses said it was too risky to take out a loan of about £20 million and complete compulsory purchase orders.

Government permission to buy up around 200 premises lapses in February.

The announcement was made on Tuesday and the council’s ruling Labour cabinet went into private session last night to formally vote to scrap the project.

Asked if traders would get compensation Councillor Peter Bilson, cabinet member for regeneration, said: “We have an obligation to all of the businesses and property interests within the Summer Row compulsory purchase order to meet with them, discuss their concerns and look at what we can do to ease their burden.”

Chiefs say council costs were underwritten by developer Multi, although they did pay about £50,000 for financial and legal advice.

In 2008 Northern Irish businessmen pulled out of the project, leaving bosses to find £150m. Since then the council, controlled at different times by Labour and a Tory-LibDem coalition, has tried to get it off the ground.

Councillor Bilson added: “Were it not for the global economic decline we would still be going forward.

“While this is very disappointing I know that the phoenix will rise in Wolverhampton and we appeal to the private sector to come show us what you’ve got to make this city open for business.”

Debenhams and Marks & Spencer signed up to anchor a development, bosses hoped would rival Merry Hill.