A decision on whether Gatwick Airport or Heathrow will be expanded has been postponed to next summer.
And PM David Cameron has been accused of making a “gutless” decision to sacrifice the UK’s economy for political advantage after the decision to postpone a final decision on how to expand airport capacity in the South-East was made.
Months after a detailed review concluded that a new runway at Heathrow was the best of three shortlisted options, the Government ordered extensive new analysis of the environmental impacts.
It said the review would be completed by the summer, allowing a choice to be made between the rival schemes - two at Heathrow and one at Gatwick - to be made in time to meet the Davies Commission’s call for more runway capacity by 2030.
The further delay was welcomed by environmental groups and local campaigners.
But critics said the delay was a politically-inspired move to avoid damaging resignations by high-profile Tories - including London mayoral candidate Zac Goldsmith, who has vowed to quit as an MP if Heathrow is approved.
The contest to succeed current City Hall incumbent Boris Johnson - himself implacably opposed to the £18.6 billion third runway project - will take place in May, with Labour candidate Sadiq Khan also against Heathrow expansion.
John Longworth, director-general at the British Chambers of Commerce, said: “Businesses will see this as a gutless move by a Government that promised a clear decision on a new runway by the end of the year.
“Business will question whether ministers are delaying critical upgrades to our national infrastructure for legitimate reasons, or to satisfy short-term political interests. Ministers need to stop prevaricating and get on with doing what the country sorely needs.”
The CBI, which criticised the “deeply disappointing” delay - has warned waiting could cost the economy more than £5bn.
The Board of Airline Representatives in the UK said it was “inconceivable that the Government has had insufficient time, or a lack of information, to make the decision it long promised.
“Every week that passes has a direct cost to the UK economy, its international connectivity and reputation”.
A delighted Mr Goldsmith said the Government had “heard the arguments, seen sense and will judge the options against an environmental test.
“There can be no doubt that in a fair contest on air quality, Heathrow will not win.”
Mr Johnson said the Heathrow runway plan was “officially grounded” and revived calls for a new airport in the Thames Estuary, dubbed “Boris Island”.
Gatwick’s chief executive, Stewart Wingate, said the delay was a “defining moment in the expansion debate” and claimed Heathrow’s supporters must now realise that a third runway will never go ahead “as the environmental hurdles are just too high”.
But Heathrow chief executive John Holland-Kaye insisted he was “confident we can meet tough environmental standards”.
The shortlist of proposals being considered by the Government also features a plan to extend the existing northern runway at Heathrow to form the equivalent of two runways.
Shadow transport secretary Lilian Greenwood said: “Tonight’s statement owes more to political calculations than genuine concern for the environment or residents who now face another year of blight and uncertainty.”
Labour former cabinet minister Andrew Adonis said: “I welcome the fact that the Government has accepted the case for an extra runway at Heathrow or Gatwick, as recommended by the independent Airports Commission.
“It is right that the decision should be taken on the basis of the latest data on environmental impacts, and the Government has committed to complete this work by the summer.
“It is vital that a decision on a new runway is now taken within months. A decision to go ahead in 2016 will make it possible to build the runway by 2030 as recommended by the Airports Commission, but any further delay beyond next summer will jeopardise jobs and growth.”