Edinburgh's controversial tram project was thrown into chaos after councillors voted to continue with the scheme but terminate the line at Haymarket.

Liberal Democrat councillors, who form one half of the council’s administration, failed to push through their plans to complete the trams project with a longer route along Princes Street to St Andrew Square.

Instead Labour, who were in power when the tram project was initially approved, had their proposal approved to end the line that runs from Edinburgh Airport at Haymarket. The group was supported by Conservative party members in the final vote.

Their amendment, which is expected to reduce initial borrowing, is expected to mean the trams scheme will run at a loss in the long term. But council plans to build the line to St Andrew Square would have meant borrowing a further £231m, pushing the overall budget over the £1bn mark.

Edinburgh Labour leader Andrew Burns said: “The decision to complete the tram project to Haymarket is clearly the option with least risk and which leaves the city with an asset. It was the only option before council today which provided a viable way forward, and I am glad that the council supported that option.”

Following the meeting, Cllr Jenny Dawe, Leader of the City of Edinburgh Council , said "It's heartbreaking that the decision to progress to St Andrew Square has fallen threatening this city's future financial vibrancy.

"I am really angry that Labour and Tory Councillors have rejected the professional advice of our Chief Executive and officers and some of the most highly regarded legal, technical, financial and engineering experts in the country.

"This was the option that was supported by the business community within the city and would have seen a profit realised. An initial line to Haymarket makes no financial sense and will have a bigger negative impact on the finances of Lothian Buses. It will run at a permanent annual £4million loss.

"If the contractor now walks away we will be faced with having to find £161m this financial year. An impossible feat."

IN DETAIL

• All the Twitter reaction to the Edinburgh trams announcement