But critics say the council should have foreseen the problems and that they have wasted thousands of pounds.

Now the council plans to seek costs from Centros for the extra expense it has incurred in defending the £150million retail-led scheme along Lancaster's canal corridor.

Speaking at the inquiry at Lancaster Town Hall, Paul Tucker, council barrister, said: "My client considers itself badly let down by the stance taken by Centros.

"This has caused unnecessary expenditure to the council tax payers of Lancaster."

Coun Stuart Langhorn, leader of Lancaster City Council, later said: "Lancaster City Council remains firmly committed to the redevelopment of the Canal Corridor North site.

"The site itself is rundown and decaying with many derelict buildings.

Without its regeneration we run the risk of falling behind other towns and cities in the North West. However, the public inquiry has raised a number of questions which need to be answered.

"It has always been the city council's position that it would present evidence to the inquiry in relation to its own decision to grant the development planning permission – not to defend the applicant.

"As many of the questions which have arisen are only ones which the applicant could answer ,we have decided to withdraw from any further participation."

Inspector John Gray said the inquiry would proceed without the council and that he would still make a recommendation to the secretary of state about the proposed development.

William Palin, secretary of development opposition group SAVE, said: "We are delighted that the council has acknowledged that there is no point in continuing its defence of this application.

"SAVE has argued from the outset that this is completely the wrong scheme for this sensitive and finely textured site."

Green Party Coun Chris Coates said that Lancaster City Council had wasted tens of thousands of pounds of taxpayers' money by withdrawing from the inquiry after two weeks.

Coun Coates said: "In April we put a motion to full council saying that because of Centros' decision not to attend the inquiry, then the city council should not spend taxpayers' money defending the developer.

"However, planning officers were adamant then that the council should attend the inquiry and pay tens of thousands of pounds for a barrister and expensive retail and traffic consultants.

"Now, having spent the money, the council is doing what it should have done in the first place.

"But by withdrawing at this late stage, and blaming Centros' non-appearance, the council has made itself a laughing stock."

The inquiry will continue and will next hear evidence from English Heritage.