The college is now seeking alternative sites

Bath and North East Somerset Council sold the South Quay site the college wanted to use to Bath Spa University.

It had been hoped that the university's new campus and the college could be share the site.

A spokesman for Dyson said it remained committed to getting the school up and running in the south west by 2009.

"Naturally we're disappointed by the council's decision. Our plans for the Dyson School of Design Innovation were at an advanced stage. We've been progressing the plans for more than two years and invested over �3 million," he added.

"We're currently investigating other sites and are confident that the School will go ahead in the south west but not in Bath."

A spokesman for the council said: "The council recognises that the Dyson Foundation is disappointed that its proposals will not go ahead on this site.

"We wish the Foundation well for the future and we would be very pleased to explore other possibilities to find an alternative site for the school."

The college would be a state school for 2,500 youngsters aged 14 to 18, with half the costs provided from the James Dyson Foundation.