Overseas investors are reeling after the Government pulled the plug on a $300 million tourism development.

But it is understood that an original rival group, with BCM MacAlpine boss Alan Burland, could be waiting in the wings to take on the project.

The backers behind the Morgan's Harbour resort at the former Naval Annex at Southampton said the announcement by Development and Opportunity Minister Terry Lister, that negotiations had been broken off was not unexpected.

But it is understood that Government "arrogance'' and hold-ups made concerned investors lose confidence in Bermuda -- when they had expected to be welcomed.

Mr. Lister said Morgan's Harbour Investment Limited was unable to meet some of the conditions set out in its agreement with the Bermuda Land Development Company, who operate the site.

MHIL had the backing of the recognised management organisation, West Group, and wanted to build a new community, with housing, hotel, golf and resort facilities.

Mr. Lister said: "The Government and the BLDC have worked hard to try to hammer out the details of an arrangement, which would be satisfactory to all concerned.

"We believed we had come up with an arrangement. MHIL and the West Group unfortunately have failed to sign a formal agreement with us, and the Government now feels it should not allow the matter to remain in limbo any longer.'' MHIL had already spent $3.5 million on preparation work and were also prepared to fund the cleaning up of the oil and other waste left behind by the United States.

MHIL chief executive Rob Davies said: "We are disappointed because we are still very committed to the project and would still like to pursue it.

"We believe it is the right project for Bermuda but we don't believe other people will have the ability to do the same quality of scheme.

"We are still committed until they tell us they have closed the door.'' Mr.

Davies added that such investment was very fragile and backers would walk away if the confidence in the jurisdiction was not there.

"They won't write a cheque if they do not have confidence for the long term and everybody is behind that project.

"This would clearly need support from the whole community, from Government to the man on the street -- that is quite hard to do in Bermuda.'' A statement from Mr. Lister concluded: "Government, together with the BLDC, now intends to have another look at the Morgan's Harbour project, to make a judgement as to whether our expectations for the project are still reasonable in all the circumstances.'' TOURISM TOU