A major obstacle to the £300m Westgate development has been removed with the Environment Agency withdrawing its objection over flood risk.

The EA caused shock waves by warning that the massive Oxford development could increase the risk of flooding to the city.

And it claimed that developers had taken insufficient account of latest research on flood levels.

But, on the eve of a crucial meeting on Monday, when the Westgate planning application goes to the city council's strategic development committee, the EA said its concerns had now been satisfied.

While the EA has no statutory power to stop the scheme, city councillors such as Susanna Pressel made clear that they could not support the scheme if the agency continued opposing it on flooding grounds.

The EA's shock intervention resulted from the alleged failure of developers to have taken account of recent research, even though it was still unpublished. But the agency says it is satisfied with the response to its concerns.

A letter to the city council from the EA says: "We are pleased to confirm that the details in the addendum submitted on October 20 enables us to withdraw our objection to the development on the grounds of reduction of flood storage."

It says the move is subject to a number of conditions, including no additional buildings being added to those agreed in the flood risk assessment.

Jane McFarland, group development manager for the Westgate Partnership, said: "In the last two weeks, we have had further meetings and detailed discussions with the Environment Agency regarding flood risk alleviation, including the provision of additional information relating to various options.

"We are pleased that this process has enabled the agency to withdraw their objections, subject to a number of conditions which will need to be satisfied prior to the commencement of development."

The developers are hoping the new centre, which would increase central Oxford's retail space by a quarter, will open in 2011.

The new modelling of flood levels suggests the city is increasingly vulnerable and it highlighted two potentially serious implications that rising flood levels could have for the scheme.

Just a fortnight ago the Agency warned that developers could not afford to ignore models which are more "accurate and based on more detailed information."