Plans to build a major industrial recycling facility that sparked outrage among Raynes Park residents have been put on hold.

Fears house prices would drop and traffic in the area be brought to a standstill if the proposed facility were approved may now not materialise after developers Workspace Glebe put its plans for the Rainbow Industrial Estate on hold.

A planning application was expected to be submitted to Merton Council in March this year after Workspace Glebe launched a public consultation and released artist's impressions of the facility - designed to process up to 100,000 tonnes of waste a year.

But a company spokesman said no application would be submitted until a list of possible locations for large-scale public recycling facilities had been finalised as part of the South London Waste Plan (SLWP) - a local government strategy to build waste facilities, including an incinerator, reducing the amount of rubbish sent to lanfill.

According to Merton Council sources and Wimbledon MP Stephen Hammond the Rainbow site is likely to be scrapped from the SLWP shortlist which is currently under consultation, potentially scuppering Workspace Glebe’s proposals.

Mr Hammond said: “This is real cause for optimism. Use of the site for a scheme of this sort has always been wholly inappropriate.”

Residents have sustained an ongoing campaign against the proposal which could have seen hundreds of lorries carrying waste through Raynes Park, en route to the “anaerobic digester” - an industrial sized composting machine.

Raynes Park councillor Rod Scott said: “Whatever the real reason for not pushing the original application forward, I would say this is hugely positive news for us.”

Questions have been raised over Workspace Glebe’s ability to finance the application after one of the joint venture’s partners - Glebe Two - went into voluntary liquidation in September prompting the other partner - Workspace Group PLC - to reduce its shareholding to zero.

However a spokesman for Workspace Glebe said the company continues to operate as normal and an application would be submitted in “due course” after the SLWP has been finalised - thought to be as late as 2010.

Workspace Group PLC continues to manage the Rainbow Industrial Estate which contains a number of small businesses renting units on short-term leases.

They would be forced to relocate if permission for development of the site were to be granted.

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