A £2 million project to restore a Victorian factory that has remained derelict for 15 years and create 40 jobs in Birmingham’s Jewellery Quarter has been rejected – because the plan does not fit council conservation policy.

Shrewsbury-based OE Developments has spent thousands of pounds commissioning architects to draw up proposals to breathe new life into the former Standard Works on Vittoria Street, creating a mix of new homes and a restaurant.

But Birmingham City Council says the scheme, which would generate around 40 full and part-time jobs, is contrary to the authority’s Jewellery Quarter conservation policy to “retain the industrial use of manufacturing premises” in the area.

Martin Ebelis, of OE Developments, has accused planners of “failing to live in the real world” and condemning the building – a former home of small jewellery businesses for many decades – to remain derelict.

“We are clearly disappointed, but we have gone as far as we could go. Nothing will happen to this building now – it will simply remain derelict,” he said.

“We have already spent a few thousand pounds and would have loved to have progressed this further.

‘‘The Jewellery Quarter is simply going to deteriorate further if the council sticks to this policy. Nobody is going to develop on that basis.

“I find their statement somewhat puzzling given other developments, such as St Paul’s Place.

‘‘We know that planners do not live in the real world but if they think anyone would go ahead with this development on the basis they suggest then they are perhaps on another planet.

“They do not seem to have taken into account the restaurant on the ground floor together with associated use in the basement.

“You have to accept change if you want to bring buildings back into use.