Campaigners against a proposed Tesco development in their village are celebrating after the supermarket chain announced yesterday with a "very heavy heart" that it could no longer afford to go ahead with the project.

SAVE Ashtead’s Village Environment campaigning group (SAVE) has opposed plans for a Tesco Metro on the old site of the Esso in The Street, Ashtead, for a number of years because it believed the development would cause a "parking crisis in the village" and negatively affect the existing car parking spaces in the town.

Mole Valley councillors gave the go-ahead for a planning application to develop the site in September 2012, but no start date for construction work was ever announced. In the last few months, Tesco even allowed residents to turn the abandoned site into a community garden.

But yesterday, the supermarket chain announced it would no longer be progressing with the plans - as well as 48 other planned stores across the country - because its "performance as a business has fallen significantly short".

Dave Lewis, Tesco’s chief executive officer, said: "It is with a heavy heart I am today announcing that we are unable to proceed with 49 planned new store developments across the UK, including our planned store in Ashtead.

"Our performance as a business has fallen significantly short of where we would want it to be and my absolute imperative has to be to protect the future of our business for the 300,000 colleagues we employ in communities all over the UK.

"I know this news will be a real disappointment to many people in the local community and we’re extremely grateful for the support we’ve received for our plans.

"I am very aware of the importance of the site to the area and I am determined we will work closely with the council to find the right solution for the local community."

But Gillian Russell, spokeswoman for Save Ashtead’s Village Environment (SAVE), said the group was "absolutely over the moon" about the announcement.

She said: "SAVE was formed seven years ago to get rid of Tesco as we felt it was an inappropriate development for Ashtead Village.

"It was oversized and we already had a Tesco in lower Ashtead so wanted more choice.

"Thank you to all our followers who have supported us over the years.  Through many twists and turns, some of Tesco’s own doing, we have achieved our goal.

"Because Tesco got planning permission for a supermarket of this size we have to accept there may be another supermarket of that size and we would still be concerned about traffic and parking issues.

"But we would still prefer it to a Tesco because we would have more choice."

She added: "We are very grateful Tesco agreed to develop it as a community garden. It’s the first project of its type in the UK."

Tesco has suffered from falling sales in recent years and also announced yesterday that it would be shutting 43 of its unprofitable supermarkets across the country, more than half of which are local Tesco Express convenience stores.

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