Contractor Severn Waste Services was refused permission by Worcestershire County Council to build the plant at the former British Sugar site in Kidderminster.

The company had been due to challenge the decision in the High Court.

But on Thursday, it announced that it would not be going ahead with the legal action.

In a statement, the company said it had taken legal advice not to make the challenge.

Severn Waste must now sit down with the councils and decide on how they can move forward

Chris Crean, Friends of the Earth

Evesham-based Severn Waste Services, which has signed a 25-year contract to manage waste in Herefordshire and Worcestershire, first launched plans to build the incinerator two years ago.

Groups including Friends of the Earth say the plant would have a devastating environmental impact if it proceeded to burn 150,000 tonnes of rubbish every year.

But the company argued that the facility was the best way to deal with the estimated 300,000 tonnes of rubbish produced in the two counties each year and would create about 100 jobs.

Chris Crean, from Friends of the Earth's West Midlands branch, described the decision as "a great day for the people of Kidderminster".

"Severn Waste must now sit down with the councils and decide on how they can move forward to develop a zero waste management system based on recycling."

Meanwhile, residents in north Worcestershire have vowed to fight proposals to burn animal carcasses just yards from the local primary school.

Planning permission for an incinerator next to Astwood Bank First School in Redditch was granted more than a decade ago, but now the owner wants a licence to start burning animal carcasses.