Industry and business groups have reacted with anger and frustration at the decision by Wales first minister Mark Drakeford not to build the £1.6bn M4 relief road.

Drakeford said the scheme would not be going ahead because of its cost and the impact on the environment. The plans would have seen the construction of a 14-mile motorway as a new gateway into south Wales aimed at tackling severe congestion faced by motorists near Newport.

The UK government Welsh secretary and the CBI both said it was a “dark day” for the Welsh economy, but the decision was greeting with delight by Friends of the Earth, who said it was “great news for Wales and the planet”. The decision will be seen as a big win for environmentalists who had campaigned to stop the scheme because of its adverse impact on the Gwent Levels.

The new leadership at the top of Welsh Labour, which saw the election of Mark Drakeford in place of Carwyn Jones has clearly impacted on the decision of the Welsh government to scrap the scheme. Drakeford was always seen as less keen on the relief road than his predecessor, but the decision still marks a U-turn on his party’s 2016 manifesto commitment.

Commenting on the decision, Civil Engineering Contractors Association Wales director, Ed Evans, said: “There has been much speculation within the industry for some time that the Welsh government has been preparing the ground to cancel their plans for an M4 relief road around Newport. It is now clear that Wales will lose out again. This has been a dreadfully slow process riddled with political indecision.

“And yet the problems for businesses and communities in this part of Wales remain as do, sadly, the environmental impacts caused by congestion and tailbacks at the tunnels. The civil engineering sector looks forward to hearing details as a matter of urgency of how the Welsh government now intends to use its borrowing powers to invest in Wales’ infrastructure with alternative schemes.”

Ian Price, CBI Wales director, said: “This is a dark day for the Welsh economy.  After decades of deliberation and over £40m spent, no problem has been solved today. Congestion and road pollution around Newport can only increase. Economic growth will be stifled, confidence in the region will weaken and the cost of an eventual relief road will rise. Today’s announcement is a short-term measure that regrettably solves nothing and sends the message that Wales is not open for business.”

Sally Gilson, head of Welsh policy at the Freight Transport Association, commented: “As the organisation representing the UK’s logistics sector, FTA is urging the first minister to reconsider his decision; the construction of a ‘Black Route’ is the only option for the Welsh economy and its citizens. The M4 is a vital stretch of infrastructure with international economic importance, yet it is blighted by heavy congestion. It  is frustrating that the opportunity to deliver this essential investment into South Wales’ infrastructure has been missed.”

Drakeford’s decision to scrap the six-lane project comes after an expensive public inquiry overseen by planning inspector Bill Wadrup, who said the case for the road had been “compelling”. However, ministers have concluded that, with austerity and Brexit looming in the background, financial uncertainties meant the project was too expensive.

Significantly, Drakeford said he would still have scrapped the scheme even if it was affordable because of the adverse impact on the environment. A commission will now look at alternative solutions to the problem of congestion on the M4 in Newport.