Despite investment of hundreds of millions stretching back almost a decade, the regeneration of Hastings and St Leonards seems to have gone awry during the last month.

Hundreds of jobs are being axed and one of the town's biggest employers is being scrapped.

Planners and politicians once had high hopes for Hastings.

A £341 million regeneration programme was supposed to combat poverty but the town is still struggling to shake off its shabby image.

The programme is using public and private money to provide 7,450 new homes, 3,970 new jobs, better university and college facilities and support for 150 new businesses.

Money is being spent to improve road and rail links and the Marina Pavilion at St Leonards is being renovated to provide a business and leisure venue.

But on Monday the Government delivered a crushing blow when it said it was replacing the Child Support Agency, which employs 1,200 people at its St Leonards offices, with a smaller body.

Earlier this month Barclays said it was axing 300 jobs at its offices in Breeds Place, Hastings. Architect Norman Foster's plan to build a giant glass seafront complex at Pelham Crescent, including a hotel, shops, offices and restaurants, has been shelved because the town's economy is not deemed healthy enough to support it. A large section of Hastings Pier has also been closed off because of safety fears.

Its owner Ravenclaw Investments has been barred from closing the rest of the structure by traders, who took out a High Court injunction.

Graham Marley, chief executive of the town's chamber of commerce, 1066 Enterprise, said: "The closure of the pier is a setback, as is Barclays' decision to move out, but a lot of the programme is still continuing."

He said efforts to improve education facilities and tackle long-term unemployment were already making a difference. Marc Heuclin, branch manager of John Bray and Sons estate agents in Wellington Square, said investors were still flooding into Hastings.

He said: "Last year we thought the property market had stabilised but sales are still soaring."

He said it was possible to buy a basic one-bedroom seafront flat for £95,000 but an influx of wealthy buyers, many of them from London, Brighton and Lewes, was steadily increasing prices.

A Grade II listed flat with a balcony and a garden would cost £145,000.

He said: "The Pelham Crescent development has been put on hold but it was never realistic in the first place.

"The main regeneration project is on course, the core elements are still in place."

The project has already made significant progress. An education centre run by the University of Brighton is up and running and has accepted 600 students.

A new railway station has been built and work is expected to start on the town centre Lacuna Place business development by the end of this year, which is expected to draw new companies into the town.

Since 2002 unemployment has fallen by 1.9 per cent and now stands at three per cent, while average weekly earnings have risen by £155 to £421. Michael Foster, Labour MP for Hastings, said the town's recovery was still going strong.

He said: "In terms of regeneration, it's good news all the way. There has been massive investment and there are 50 per cent fewer jobless than in 1997.

"The number of jobless continues to be an issue but the reason is not that we don't have jobs, it's that many people who are unemployed don't have the qualifications necessary to take the jobs available.

"Barclays couldn't fill its vacancies. That's one of the reasons improvements to education are so important.

"There are lots of new people and businesses coming into the town.

There's a new boutique hotel opening at the seafront and the Daily Mail's showbusiness correspondent Baz Bamigboye has just bought property here."

Mr Foster said ministers had promised him that despite the CSA's closure, there would be no reduction in the number of civil service jobs in Hastings and St Leonards.

Eddie Fleming, chairman of the Hastings Public and Commercial Services Union (PCS), said: "We have been trying to get assurances there won't be any job losses but we keep being told they can't give us any information about jobs or the location of the new CSA.

"The Government is talking about streamlining the CSA. At the moment there are 12,500 people working for the agency and that's got to go down to 9,500 by 2008.

"There are 1,200 people working for the CSA in St Leonards so that's going to go down to 950.

"We are being told staff may be able to move to other departments in the Department for Work and Pensions but we haven't seen any confirmation.

"I think the loss of jobs is devastating. We have seen 300 go at Barclays already and we cannot get guarantees there won't be job losses at the CSA.

"Members are really concerned."