The final nail in the coffin of Croydon's controversial arena scheme was hammered home this morning.

Communities secretary Hazel Blears announced she was rejecting Croydon Council's request for a compulsory purchase order (CPO) forcing developers Stanhope/Schroders to sell land at East Croydon.

Rival developers Arrowcroft, backed by the council, had plans to build a 12,500 seat arena there, the subject of a public inquiry last year which also considered the CPO.

Last week, Ms Blears rejected Arrowcroft's scheme, which also included homes, offices, a superstore and restaurants, after planning inspector Ava Wood concluded its financial proposals for funding the arena were not convincing enough.

Therefore, today's announcement has not come as a total surprise.

In her letter announcing the decision, Ms Blears said there not enough evidence to persuade her that granting a CPO would make the plan deliverable.

She makes of point of saying that she believes the rival Stanhope/Schroders scheme for homes, offices, a park and a new Warehouse Theatre would achieve many of the regeneration benefits of the Arrowcroft proposals "notwithstanding that it does not include an arena."

Ms Blears ruled there was therefore no "compelling need in the public interest" for the CPO to be granted.

Stanhope/Schroders says the decision has given them the green light to get on with their scheme, which has planning permission.

In a joint statement, William Hill, managing director of Schroders Investment Managers and David Camp, chief executive of Stanhope, said they were delighted at the decision.

They said: "We hope that having fought for years for permission to develop out site, we can now put the tortuous planning history behind us.

"We look forward to early discussions with the council so that we can make a start on our development which we believe will act as a catalyst for the regeneration of the rest of Croydon."

The council has always maintained an arena-led scheme would be a one-off opportunity for unparalleled regeneration.

Cllr Tim Pollard, the council's cabinet member for regeneration, said: "We have to acknowledge the decisions are very disappointing.

"At this stage we need time to examine and analyse fully both decision letters but we are determined to maintain our focus on our strategic ambition for the regeneration of our town centre."

It is understood the only way the CPO can be challenged is through a judicial review.

Arrowcroft has still not announced whether it will appeal against the refusal of planning permission.

A spokesman said today the company could not comment on the CPO ruling as they had not seen the decision letter.