Ask people involved in Liverpool’s Building Schools for the Future programme for their reaction to the news that 26 schools in the city have been scrapped and the most common response is “devastated”. Followed pretty swiftly by “angry”. “Physically sick” was how Liberal Democrat former council leader Warren Bradley summed it up.

These sentiments are echoed by the children of St John Bosco Catholic girls’ school, who have spent the past year and a half helping the council, developers and architects work up plans. Jane Corbett, the council’s education cabinet member, met the children of the BSF sample school last week. “They said: ’Jane, how can the government destroy young people’s dreams just like that?’” she reports. “I didn’t know how to answer them.”

It’s not just the children who are upset, though they would have been the main beneficiaries of the £350m public investment in the city. Contractors Morgan Sindall and Balfour Beatty, who were both leading bids for the work, are the others who will most obviously lose out. But Liverpool, which could have gained 1,000 jobs through the scheme, also serves as a microcosm of exactly how the cancellation of the £55bn BSF programme - announced last week by education secretary Michael Gove - will hit. It isn’t just an education problem or a construction industry problem; it affects whole communities.

‘So much work has gone in’

Since the shooting of 11-year-old Rhys Jones on the Croxteth Park estate in 2007, that area of Liverpool has been a national byword for deprivation and poverty. Much of the area falls in the top 5% of the most deprived neighbourhoods in the country.

Despite this, the story of St John Bosco, one of the schools that serves the area, is not one of failure. According to the Department for Education, it is in the top five schools in the city and has an energetic head who’s worked hard to turn it around.

It is, however, made up of a mish-mash of buildings from the fifties and sixties and has many physical problems, including a decaying frontage that had threatened to collapse. In an area that has well above average childhood obesity, it doesn’t help that it has cramped and dismal sports facilities. Anne Pontifex, head of the school, says: “This is one of the most deprived areas, and we have gun and knife crime going on. We wanted to build something that was going to be open to the community.”

Under wave six of the BSF programme, it was chosen as a sample school to determine the design of all 26 schools in the city - and was promised a £24m new school itself.

The time already invested in this process is frightening, and goes some way to explaining the anger. Pontifex says there have been at least three four-hour meetings each week for the past 18 months, all of them involving three or more members of staff. Initially they also included Partnerships for Schools, council planners and US architect Scott Prisco to develop the sample school, latterly the two bidding consortiums and their designers. This is on top of the council-commissioned planning process, run by Taylor Young, and work to merge the maintenance regime for all the schools.

Both consortiums, having been working since April, were due to submit their bids for the first phase of the scheme last Friday, but hadn’t reached the vital preferred bidder stage. Then came Gove’s announcement. All that work, it seems, was for nothing. One of the St John Bosco students, 15-year-old Lynsey Campbell, says: “The whole school was devastated - so much work has gone in. The politicians told us we could have it, and then they took it away for nothing.”

Liverpool’s loss

The council’s Labour leader, Joe Anderson, estimates the total lost investment to the city is £410.5m. He says: “It is not just our children’s education that is being put at risk; there is a huge knock-on effect for the local economy at a time when the construction industry is crying out for contracts.”

The council is leading a delegation to London to try and persuade ministers to reconsider, but most think it is unlikely that anything can be done. Former leader Bradley is lobbying his party leader, Nick Clegg, to try and get the policy changed.

Graham Shennan, managing director of Morgan Sindall, says: “Clearly this is devastating news for pupils, teachers, parents and the local Liverpool economy.”

Morgan Sindall already employs 108 local people in other education projects in the city, with 80% of those on its sites coming from within the borough of Liverpool. The proposed BSF programme is about six times that size, which gives some idea of the likely impact on local jobs and skills.

Shennan won’t say how much the firm has already spent on the bid, but one consultant on it estimates each contractor could have parted with anything up to £1m.

Shed KM, one of the architects working with Morgan Sindall, was working through the weekend to finalise the bid, in what turned out to be the final hours before Gove’s announcement. Hazel Rounding, a director at the firm, says: “We’d just started to get a real relationship with the client. I just feel terrible for the school.”

The cold, hard reality is that Shed could have gone on to design five or six of the 26 schools if Morgan Sindall had succeeded. The chance of that work is now gone.

One of the reasons Shed - not a known school architect - was involved in the bid was because of its former work in redesigning the grade II-listed Littlewoods building for developer Urban Splash. This iconic building, in Edge Lane to the east of the city centre, has latterly become a flagship part of the BSF programme. When Splash’s prospective buyer for the scheme dropped out, the council decided to combine two schools on the site, thereby making the BSF wave a key part of regeneration plans in the city.

Eleanor Benson is head of one of the schools, St Hilda’s CE high school. “For us this was a once-in-a-generation chance to get proper facilities. But it was also solving a lot of problems, and fitted coherently into a regeneration plan for the city. We’re very angry and frustrated.”

For a city such as Liverpool, which has battled for years with a falling population - just 400,000 people live there, compared with 700,000 in its heyday - rebuilding the schools was just one part of a wider strategy to turn it around. Any estate agent will tell you how important good schools are to the strength of an area’s housing market, making new-build development more likely. Corbett says: “If businesses know we’ve got top-quality schools, then we can attract people, and we can retain the graduates who currently leave here after university.”

Look at this wider picture and it is not just in BSF funding that potential investment is haemorrhaging. The city’s housing market renewal scheme is facing a cut of up to 18% in its £51m annual funding. And the North West Development Agency, which invested £32.5m in construction projects in the city last year, is facing the axe.

As St John Bosco’s Campbell says, it is these wider impacts that are the most fundamental. “Croxteth isn’t that much of a bad place, but it’s got a bad name. We needed BSF to bring people in and see it’s not really that bad.”

Liverpool is only one example. The BSF cuts will be having this kind of impact on development in every community they hit. Education is just the start.