Boris Johnson in Waterloo skyscraper U-turn

The mixed-use P&O development, designed by Southwark architects Allies and Morrison, would replace Elizabeth House on York Road alongside Waterloo Station.

Nicknamed "the three sisters", the scheme ranges in height from 20 to 33 storeys and would create nearly 4,000 jobs and 274 homes.

Lambeth Council's planning applications committee resolved to approve the application in July but it looked like the Mayor of London might intervene to reject the proposal.

"Having now considered a report on this case, I am content to allow Lambeth Council to determine the case itself, subject to any action that the secretary of state may take, and do not therefore wish to direct refusal," wrote Mr Johnson last week.

This is a reversal of the Mayor's position in July when he concluded that "the proposal is unacceptable in strategic planning terms due to the impact of the proposal on the setting of the Westminster World Heritage Site, the view from the footbridge in St James's Park, the setting of County Hall and the Royal Festival Hall from various viewpoints".

English Heritage and the City of Westminster both object vigourously to the P&O scheme and it seems likely that English Heritage will lobby communities secretary Hazel Blears to 'call in' the application for a public inquiry.

Whether the development goes ahead will probably ultimately depend on the economic situation. Earlier this year P&O was arguing that the viability of the scheme was doubtful and it is unlikely that the picture has improved over the past few months.