The Department for Transport has refused to contribute £7m of funding towards a key station on the second phase of the East London Line extension.
The Surrey Canal Road station, to the north of New Cross, would have cost £10m to build. The London Borough of Lewisham had agreed to contribute the £3m.
But minister of state for transport Theresa Villiers said the government would not provide the additional £7m required for construction to proceed due to “funding constraints”.
She said: “In making this decision I was also concerned the scheme would not provide good value for money for the taxpayer.”
Labour MP for Lewisham Deptford Joan Ruddock said: “I am extremely disappointed by this outcome. The business case for the station is robust and I am sorry department officials and the minister have taken a different view.
“It is not a matter of, ‘if’ but ‘when’ the station will be built and I will continue to work with Lewisham Council, Transport for London and local developers to put forward the case.”
Earlier this year, Transport for London invited bidders for the £75m East London Line extension phase II, a contract covering the construction of 1.3km of new railway between Surrey Quays and Queens Road Peckham. A winner is due to be announced in October.