A £10m scheme to convert a 19th Century railway engine shed into a visitor centre to commemorate Captain James Cook has suffered a setback.

The company behind the venture, the Captain James Cook RN (Charity Trust, Whitby Limited) wants to put up new buildings alongside the listed engine shed, in Whitby, North Yorkshire.

But Scarborough Borough Council's development and regulation committee has vetoed the idea on the grounds of over-development of the site and that it would have a major visual impact on the prime site alongside the upper harbour, close to the area where Captain Cook's ships were docked in preparation for voyages to the South Seas.

Opposition to the proposal had also come from English Heritage, the North York Moors Railway and Whitby Town Council.

The company said the project would create up to 55 jobs and boost Whitby's economy by as much as £2.5m a year.

Approval in principle has already been given. The company said it would now explore its next step in dealing with the planning application.