A decision to keep the South Island ferry terminal base in Picton - dashing hopes for a reduced travelling time between the North and South islands - has been met with celebration in the Marlborough town.

Transport Minister Gerry Brownlee announced the news today after a year-long Transport Ministry investigation found the construction of a privately-funded Clifford Bay terminal, 35km south of Blenheim, would not be viable.

While the Transport Ministry investigation estimated the travel time between Wellington and Christchurch for road-ferry travellers would have reduced by almost an hour and a half, and nearly two hours for rail passengers, Picton locals said the possible effects of losing tourist business from docking ferries would be devastating.

Marlborough mayor Alistair Sowman said today's decision had been greeted with "relief" by Picton residents.

"We've been waiting for this for a number of years, and really it's paralysed a town that couldn't move forward."

"Nobody could invest money in Picton [and] nobody could sell their businesses, because you just don't know what the future would hold."

According to Destination Marlborough, 1.2 million tourists travelled to Picton on the ferry each year, he said.

The proposed ferry terminal shift would have affected more than 100 families who rely on business from ferry tourists, he said.

The Transport Ministry investigation report estimated a terminal at Clifford Bay could have been delivered by 2022 at a cost of $525 million - but the Government would have been required to fill a funding shortfall for private investors to proceed with the project.

Mr Brownlee cited this cost, as well as the risks associated with a Clifford Bay terminal and "the lack of a compelling constraint at Picton" for not proceeding with the Clifford Bay Terminal.

Marlborough Chamber of Commerce said there had been "mixed feelings" about the proposal in the local community, but the decision had provided certainty for businesses.

While many feared a shift to Clifford Bay would result in a downturn due to lower visitor numbers, some businesses had seen it as an opportunity to develop Picton into a more "tourist destination" town, similar to Queenstown or Rotorua, chamber president Nicky de Reeper said.

"But, that is something that is still in the pipeline."

KiwiRail, which owns the Interislander ferry service, was pleased a decision had been reached.

Chief executive Jim Quinn said there had been pros and cons to the proposed shift, and the company was now able to plan around Picton continuing as the ferry base.

"If it was to [move to] Clifford Bay, there would have been a shorter journey time, it would have cost less fuel among the ships in a different way [but] inevitably there would have been a big investment required and it would have created some new costs in a different way."

Strait Shipping, which operates the Bluebridge passenger ferry, said development plans in Picton - which had been on hold due to the proposal - could now proceed.

Marlborough tourist operators:

* Sounds Connection co-owner Mark Baxter

Supports the terminal staying in Picton. "It provides certainty for the future. It is the outcome we wanted."

* Boating Marlborough co-owner Stuart Scaife

Happy a decision had been made. "It means that there's some sort of degree of non-change in that respect. I think it's good news."

*Wilderness Guides' co-owner Juliet Gibbons

Supports the decision, and said it was a great opportunity for Picton to develop as a tourist destination.

"It's a good think for our business, for Picton and the wider community. We have a massive market that travels on the ferry every year, but also we have Picton developing as a destination."