Channel 4 announced on Friday it was cancelling plans to become a digital radio broadcaster and pulling out of a consortium in which it is the majority shareholder.

But remaining members of 4 Digital Group, which has been trying to launch a cluster of stations known as a multiplex, said Channel 4's dramatic move did not mean their enterprise would fold.

Channel 4 blamed the economic downturn for its decision to pull out of the group and shelve all radio plans, saying it would save £10m in 2009 as a result of the policy reversal.

Andy Duncan, Channel 4's Chief Executive, said: "Frustratingly, our plans have been overtaken by a drastic recent downturn in our revenues and we will have to forgo this future profit stream.

"We can no longer afford the short-term investment necessary given that we are having to cut so deeply across all parts of the organisation."

People familiar with internal discussions said the broadcaster, which two weeks ago announced 15 per cent job cuts as it attempted to cut £50m off its annual operating costs, could only see the downturn getting worse.

"We depend a lot on financial services advertising and the companies who are making headlines around the world are the ones that spend money on advertising campaigns," one person said.

Originally, Channel 4's three stations were to form the core of the second national commercial multiplex, D2. But delays in launching led many analysts to believe there was insufficient demand to go ahead.

The collapse last week of talks with Global Radio, the largest commercial radio company in the UK, to share space on Global's D1 multiplex, "gave the thing a nudge" towards Friday's decision, the same person said.

Although Channel 4 blamed recent exigencies for its volte-face on radio, several board members had expressed doubts about into radio in the first place. One launch date after another has been postponed in recent months as the scale of the plan diminished.

Remaining members of the 4 Digital Group were defiant in saying that they would carry on with the scheme in the absence of Channel 4, which owns more than 50 per cent of it.

Simon Cole, chief executive of one partner, UBC Media and chairman of the Digital Radio Development Board, said: "This certainly does not mean the end of 4 Digital Group. This is one step in a fundamental restructuring of the plan that was already underway."

Ofcom, the broadcasting regulator, was prompted to put out an immediate statement saying it "continues to believe that DAB [Digital Audio Broadcasting] offers listeners real benefits".

The regulator said it was meeting Channel 4's partners in 4DG, including UBC Media, Bauer Radio, Global Radio, British Sky Broadcasting's Sky Radio and UTV Media, to hear their proposals for future development.

Discussions will also take place with other broadcasters, especially the BBC, about the future of digital radio.

The BBC, which provides the backbone for the medium with nine channels, has committed itself to the future of DAB and the government has also backed the platform. There are almost 8 million DAB sets in the UK.