Gaufron Developments said it planned to relocate a Co-operative store to the school site.

BBC: Deal for 'free' Hay-on-Wye school dropped by Powys council

"We are extremely disappointed with the council's decision as we felt that the relocation of the existing Co-operative store onto the town centre site would have brought huge financial benefits to both the council and the county's tax payers, " said a spokesman.

BBC: Deal for 'free' Hay-on-Wye school dropped by Powys council

The Channel Islands Co-Operative society wants to build a new food store, offices and an artists' studio on the site of its existing store.

BBC: Co-op store plans are too big: Jersey planning department