The studios received nearly �2m of Objective One funding

The �5.7m South West Films Studios at St Agnes went into administration last year. Objective One put in nearly �2m.

Creditor Guy Mitchell, who said he was owed more than �10,000, was critical of the project.

But Objective One said all businesses were rigorously assessed, and other business leaders defended the scheme.

Paying visitors

Mr Mitchell said: "I thought that they would have been in meetings on a regular basis to find out exactly where the money was going and to keep an audit on the accounts."

The Gaia Centre for Alternative Energy, which also received Objective One cash, went into administrative receivership in March 2003.

Failure is part of the process Tim Jones, Devon and Cornwall Business Council

It received only 10% of the paying visitors it had been expected to attract. Business leaders said some projects were bound to fail but that risks still had to be taken.

Tim Jones, of the Devon and Cornwall Business Council, said: "In this case failure is part of the process. It happens everyday in business and the Objective One programme is no different."

Former South West Films Studios director Alex Swan said such schemes still brought money to the county even if they later failed.

He said: "Objective One is not about investment as an investment to get money back. It is about the creation of jobs and increasing GDP of the area.

"Two films have gone though the studios already, representing money that has gone into the local economy."

More than 600 projects have been backed by Objective One with �230m committed.