Crown House, run by HM Prison Service, was due to be demolished, with the site set to play a pivotal role in the Evolution Corby regeneration scheme.

But a leaked internal Prison Service memo seen by the Evening Telegraph reveals town centre owners Land Securities have withdrawn their interest in the site.

The memo from Simon Sparrow, head of finance and performance, stated: "Land Securities has very recently and for the time being at least, withdrawn their interest in purchasing Crown House."

A Prison Service spokesman said: "The company who expressed interest in buying Crown House have now withdrawn their offer for the time being.
The National Offender Management Service will continue to look for another buyer."

In April, Land Securities said work on Evolution Corby – set to include a department store, two multi-storey car parks, 350 homes and dozens of shops – could begin as early as the end of 2009 and be finished by 2012.

Bosses now say they cannot predict when work will start.

Land Securities centre manager Dan Pickard said: "We have made several offers on Crown House but the current offer has now lapsed.

"We are committed to Evolution Corby and negotiations will continue. We just cannot say an exact date for work to start."

More than 90 Prison Service workers who were told they had to move to Leicester and London are furious that their move now seems unnecessary.

Several staff are known to have left their jobs because they couldn't face the daily commute.

Two dozen workers are still at Crown House but many more have already relocated, despite fierce protests.

The Prison Service told workers they were moving to make way for the redevelopment, but last year it was revealed that the service could not attract enough degree-level and mixed race applicants in Corby.