The Icelander had asked for more time to think over the transfer but after discussing the move with his family has informed Ipswich manager George Burley of his decision to stay.

Albion manager Gary Megson spoke of his disappointment after missing out on one of his transfer targets.

"I've been told he's not coming because he doesn't fancy another relegation battle. That was the reason given by his agent," he told the Express and Star newspaper.

"I've wanted Hreidarsson for a long time, but it's not going to happen unless he has a change of heart.

"I showed him around the ground yesterday and he seemed fine. So this has come as a bit of a surprise. What can I do? I can't force him to come."

The Baggies had agreed a club-record fee with Ipswich for the 28-year-old Icelandic international, believed to be in the region of �4m.

But it was thought that the defender would have had to have taken a large pay cut if he had left Portman Road, where he reportedly earns �18,000 a week.

Ipswich chairman David Sheepshanks said: "Hermann came to see the manager, George Burley, and myself earlier after considering the move to West Bromwich Albion and said he would prefer not to make the move."

Burley added: "It was with great reluctance that we accepted West Brom's offer for Hermann in the first place and the only reason it was accepted was because of our financial restraints."

Hreidarsson was Ipswich's record signing when he joined the club from Wimbledon for �4.5m at the start of the 2000/2001 season.

West Brom have renewed their interest in Leicester City's Lee Marshall, as they bid to bolster their squad for the Premiership.

Baggies managing director Brendan Batson revealed talks were on-going with the 23-year-old's agent.

Batson told the club's website: "We want to try and conclude a deal as soon as possible."

New deal for Hoult

Meanwhile, West Brom goalkeeper Russell Hoult has signed a new four-year contract with the Premiership newcomers.

The former Derby player was a key figure in Albion's promotion season which saw them regain their place in the top flight after a 16-year absence.

"We started talks over a new contract at the end of last season and it's good that everything has been sorted out before the first game this weekend," said Hoult.

"I am very settled and very happy at this club and the last year and a half have been probably the most enjoyable of all my time in football.

"I know it is going to be a big challenge for us all in the Premiership but you thrive on that sort of thing."