Sir Richard Branson has decided not to proceed with a legal challenge to the Lottery Commission's decision to award the UK's National Lottery to Camelot.

He fears that a successful judicial challenge could damage confidence in the Lottery.

We had to think realistically about whether we were going to cause more damage by continuing the process than by bowing out.

Sir Richard Branson

The Virgin group founder also said he would not make any future lottery bids.

He quashed speculation that he would set up a rival lottery, saying it was not possible under current UK law.

However, if Camelot failed to reach their target of raising �15bn for good causes, "we will look at other ways of trying to make up the difference," he said.

"The law does not permit it at present... I think it is unlikely therefore that we will set up a rival lottery," he said.

Urgent review

But he continued to criticise the commission's decision to award the licence to Camelot, calling for an urgent review of the entire process.

The decision was "cowardly" and "substantively unfair" and the entrepreneur said he wanted a full publication of both bids.

Sir Richard and his People's Lottery team consulted lawyers, who said they had a "strong case" for a judicial review, but feared the "ramifications" of a successful challenge.

If the legal challenge did succeed, there was real risk that the lottery would have to be closed down for a few months, ultimately harming the good causes they had hoped to help, he said.

Sir Richard said: "We had to think realistically whether we were going to cause more damage by continuing the process than by bowing out.

"We were concerned that if we went through another three or four months in the courts the amount of money lost may never have been made up," he said.

One option that remained open to the People's Lottery was that it could run a lottery from overseas.

Disappointment

The People's Lottery had been widely tipped to be chosen to take over the seven-year franchise of the National Lottery once Camelot's tenure was over.

Sir Richard was left "bitterly disappointed" by last month's decision in favour of the present operators.

In August Dame Helena Shovelton, chair of the Lottery Commission, told the People's Lottery it would be the sole bidders for the franchise.

But following an appeal to the High Court by Camelot, the bidding process again became a two-horse race. Dame Helena then resigned and Lord Burns took over.

Pushed towards action

Earlier, a spokesman for the People's Lottery said the consortium felt it was "being pushed" towards appealing for a judicial review.

"We met with our lawyers this morning and they have advised us we have a very strong case for a judicial review," the spokesman said.

There is enormous advantage in an incumbent operator - it is very difficult for a challenger to establish their credentials

Chris Smith Culture Secretary

The commission has said it preferred not to meet Sir Richard and his team while the "threat of legal proceedings" remained.

Speaking on BBC Radio 2's Jimmy Young show, culture secretary Chris Smith said the selection process was "flawed" and gave an unfair advantage to the current operator and should be reviewed.

He said: "There is enormous advantage in an incumbent operator - it is very difficult for a challenger to establish their credentials and prove beyond any peradventure that they can deliver more for the good causes, which is of course the key test on which the judgment has to be made."

Mr Smith added that the government could not stand in Sir Richard's way if he chose to start up an independent lottery.

"Good luck to him if he wants to do that," he said.