Oxford United's future was left hanging in the balance today after the tycoon planning to buy the club pulled out of the deal.

John Gunn, for Bahamas-based Grenoble Investments, vetoed the takeover after realising the club's financial situation. Now United, which has £10m debts, again needs a new buyer.

Grenoble Investments was also considering a hotel and leisure complex on land owned by Oxford City Council, next to United's half-built Minchery Farm stadium. It will cost £15m to finish building the new £21m ground.

Mr Gunn's vision for Oxford bore a close resemblance to the hotel and leisure complex developed by Ken Bates at Chelsea.

But Mr Gunn and his unnamed property developer partner were unprepared for the state of Oxford United's finances. "When we studied the accounts it was soon apparent just how much it would cost to keep the business afloat," he said. "The other problem was that so many potential planning problems apply to the land around the Manor Ground that there was no guarantee we could have built the housing development there, which was needed to make the deal viable." It never had anything to do with football."

It is not known whether the consortium has collapsed completely or whether the second property developer is still showing interest.

Before pulling out, Mr Gunn had signed a conditional contract to buy ex-chairman Robin Herd's 89.2 per cent majority shareholding. United said it would be seeking a meeting with Bow Lane Capital to clarify its clients' position in the light of John Gunn's withdrawal. "We would remind everybody that the agreement is between Grenoble and Robin Herd," the club stated. and not directly with the club." Oxford East MP Andrew Smith said: "I am shocked at this latest blow and that the new backers have pulled out. Everything possible must be done to keep Oxford United afloat as a viable and successful football club," adding it would "be a tragedy for Oxford football" if the new stadium was not completed.

Oxford City Council leader John Tanner added: "I am sorry to hear that Grenoble Investments are no longer able to go ahead with plans to buy Oxford United."

Last week the Oxford Mail revealed that Mr Gunn was criticised by the Department of Trade and Industry after his former company collapsed with huge debts.

The British and Commonwealth finance group - B&C - went into administration in 1990 after a disastrous £408m acquisition of Atlantic Computers in 1988.

Earlier this year, a High Court action was brought against him by the DTI with the aim of disqualifying him from holding a directorship but he was cleared of any blame.

His bid to join Chelsea Village, a hotel and leisure complex at Chelsea Football Club in London, was hampered by the DTI investigation.

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