The State conceded defeat in the case taken by Save Our Bride Otters which opposed the plan which consisted of flood defence walls, embankments, the removal and replacement of historic bridges and the culverting of the 350m stretch of the River Bride in Blackpool Village.
The group say the scheme would have a left a village which was built on the banks of a river, without a river.
Speaking to RedFM News Chris Moody of Save Our Bride Otters says they will be watching closely to see what happens next:
"Again, we don't know exactly what the response to this will be from the from the Office of Public Works and from the Minister of Public expenditure and reform because that was what we were challenging the sign off on the scheme. We are hoping that they will go to one of the other options and consider one of the one of the options, consider the Blackpool was upstream storage, which basically temporarily attenuates floodwater and would protect Blackpool village from flooding. It's far less destructive than covering over a significant length of river in Blackpool village, the river Bride."
