The prospect of lower energy costs have faded after the French energy company, EDF, dramatically pulled the plug on a deal to buy the UK nuclear power firm, British Energy.

Consumers groups said the U-turn will cause uncertainty for energy security in the future.

French state-controlled electricity company EDF and British Gas parent Centrica were poised to announce a £12 billion takeover of nuclear power operator British Energy but the deal was binned overnight.

British Energy - 35 per cent owned by the Government which had hoped to sell its stake - has eight nuclear power plants and generates around a fifth of the UK's electricity.

Just hours before the deal was due to be completed, EDF released a statement saying: "After in-depth discussions, EDF considers that the conditions for a major development in Great Britain are not met to date."

On hearing the decision, Mick Rix, national officer of the GMB union, said: "The future development of Britain's nuclear energy capability is at stake here. The public are reduced to bystanders witnessing the failure of the Government's market-led strategy for keeping the lights on.

"The collapse of this deal means further uncertainty for the British Energy workforce and for energy security for the UK's population. It is an indictment of the Business Department's laissez-faire approach towards energy policy."

The deal, which had included months of negotiations, apparently broke down over price.

EDF provides 80 per cent of France's electricity from its 58 reactors and is the world's biggest single producer of nuclear energy.

Shadow Energy Minister Charles Hendry said: "The breakdown of talks is worrying but not critical to the future of new build nuclear in the UK.

"Time is not on our side, as the Government has left it very late to give a firm direction for nuclear. We need a clear resolution quickly, as further delays might make it difficult to fill the looming energy gap.

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