Housebuilder Lovell is gearing up to fight the council for the estimated £3m costs that it has ploughed into bidding for the failed 500-home PFI scheme in north-east Derbyshire.

The council revealed on Tuesday that the £39m project to refurbish council housing was being abandoned after “it turned out to be more than we can afford”.

It is understood that the members of the consortium – which include Carillion, Dexia Public Finance Bank and Leicester Housing Association – plan to pursue the council for costs incurred over the past six years.

It is also understood that the key to the failure of the project was the £285,000 annual insurance cost that the council would have had to fund.

The collapse is the latest in a series of setbacks to the social housing PFI programme, with the government pulling the plug on a scheme in Camden in February over funding and another scheme in Ashford being retendered after the council rejected plans put forward by preferred bidder United House.