One of the UK’s most ambitious arts projects which was meant to form a centrepiece of the nation’s Olympic year celebrations was scrapped after organisers admitted it would never come in on budget or on time.

Column – a three mile vortex of water vapour – was meant to rise into the sky above Merseyside last year. But severe delays caused by a raft of technical, regulatory and environmental problems means the beleaguered project which already missed its 2012 deadline has had to be abandoned despite more than £500,000 of lottery-awarded Arts Council England cash having been lavished on it.

New York-based British-born artist Anthony McCall, who received a £40,000 fee for his work on the ill-starred scheme, said he was “profoundly disappointed” at having to give up on the artwork which was expected to be visible from 60 miles away. It was hoped the giant installation would generate millions of pounds for the local economy.

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Mr McCall, who has built a global reputation as an avant-garde international light artist, said: “My team has worked long and hard but due to the many regulatory and technical challenges, we are not able to bring Column to completion.”

It was among 12 commissions for Artists Taking the Lead, a Cultural Olympiad initiative which included works such as Nowhereisland, in which a 144ft chunk of Arctic rock was towed around the English coast, and Forest Pitch - two football matches staged on a cleared area of remote Scottish woodland. Column is the only one which will not now happen.

Mr McCall is not expected to return his fee. A further £15,000 was spent on general expenses including the artist’s travel and subsistence.

Arts Council executive director Laura Dyer defended the decision to go ahead with an additional £110,000 award last year on top of the original £500,000 award after Column began to suffer a series of setbacks.

“Of course it is very important to us that we manage the risks associated with our investment of taxpayers’ money. We have monitored the development of Column closely, but in a very small number of cases the price we pay for exciting ideas is that the risk doesn’t pay off,” she said.

Column was hit by the concerns of civil aviation regulators who feared it could interfere with planes taking off and landing at nearby John Lennon International Airport. Safety experts recreated the twisting vortex - designed to look like a tornado – in an aircraft hangar and flying models through it.

It was also affected by algae in its water supply which required the mechanism to be redesigned and moved to an exposed spot in a soon-to-be-regenerated dock in Wirral Waters, Birkenhead. Here it encountered further problems with the weather and it is believed that the mechanism for drawing in the water to create the column of vapour ultimately did not work.

Work has been continuing over winter and the Arts Council had hoped the project would be lighting up the sky by early summer – before planning permission lapsed in July when the impact on birdlife in the Mersey Estuary was set to be reassessed.

But the funding body insisted that the project had not been too ambitious and was realisable – only not within the present budgetary and time constraints. A contingency fund of £75,000 remains unspent.

It was hinted that efforts to build Column could now continue overseas. Meanwhile, the failure is a huge embarrassment for the arts world on Merseyside already battling against budget cuts. Wirral Council was forced to put the Pacific Road Arts Centre in Birkenhead – one of Britain’s most deprived areas – up for sale in 2010 to save money sparking anger from musicians including Midge Ure. Neighbouring Liverpool City Council’s overall cultural grants budget has fallen by 13.4% since 2008/09, with its total funding to core arts organisations cut by 4.3%.

The Arts Council England dropped funding for arts organisations by 15 per cent after the 2010 comprehensive spending review and faced further cuts in the two years after that. Arts Council England’s new chairman Peter Bazalgette used his first speech to emphasise the importance of the arts and culture to regional economic growth.