The Tay Cities Deal is being delayed in the wake of the jobs crisis at Michelin.
Ministers were looking at signing off the huge investment package on Wednesday after both governments pledged a combined £350 million of public money.
But they have agreed that would not be appropriate following revelations that one of Dundee’s biggest employers plans to pull out of the city by 2020.
A meeting is expected to take place at Dundee City Council today to discuss the impact of the devastating development on the city deal.
The UK and Scottish administrations hope that agreement on the heads of terms, which will reveal which economy-boosting projects are being supported, can be sealed within a fortnight.
A UK Government source said they would look at whether the package can be changed to mitigate the impact of the proposed Michelin closure.
“We’ve agreed with the Scottish Government it would not be appropriate to launch the Tay Cities deal on Wednesday as planned,” the source said.
“We want to take a step back to absorb this deeply concerning news.
“We want to ensure the package of projects and funding is the right one in these circumstances.”
>> Keep up to date with the latest news with The Courier newsletter
Last week’s Budget confirmed that the total package from the governments would be £350m.
The SNP administration has pledged £200m, with £150m coming from Theresa May’s government.
Dozens of projects will secure financial backing through the deal, which the bidding team hoped would create 15,000 jobs in Dundee, Angus, Perthshire and North East Fife.
The Courier understands the Cross Tay Link Road, the International Aviation Academy in Dundee, Perth City Hall and the St Andrews University’s Eden Campus in Guardbridge will benefit.
Responding to the Michelin news, a UK Government spokeswoman said they are “reviewing how we invest the £150m we are putting into the Tay Cities Deal, to make sure that the deal can respond to this challenge”.