Bang! went $7bn research, pounds 500m in kit, 10 years' work, dozens of scientists' careers and, probably, Europe's future in space

The European Space Agency's hopes of dominating the lucrative market for launching commercial satellites exploded in flames yesterday when technicians at the Agency's launch pad in French Guiana deliberately blew up the Ariane-5 rocket as it veered off-course just 40 seconds into its maiden flight.

The burning wreckage of Europe's biggest ever rocket and the first of a new generation of heavy launchers fell back to Earth near the launch site at Kourou, carrying with it the debris of four scientific satellites, known as "Cluster".

Raymond Orye, ESA's head of the Ariane-5 programme, said that the exhaust nozzles at the base of two boosters strapped to the main launcher, which pivot to set the rocket's course, swivelled abnormally after 37 seconds and broke off, triggering an on-board self-destruction mechanism. Ground controllers detonated the remains to prevent the hail of blazing wreckage from endangering a residential area.

Rocket and payload had cost around pounds 500m. Neither was insured.

Journalists at the control centre heard two explosions and saw a giant wreath of orange flames and blazing wreckage 2.5 miles away. Officials then hustled them indoors and evacuated the area.

About 100 invited guests watching the launch at Toucan, just two miles away, were evacuated wearing gas masks. They arrived at the Agency's press centre looking shaken.

Cheers at the control centre as the giant rocket lifted off turned to stunned dejection. Some ground controllers wept. The local government prefect, Pierre Dartout, said there was no danger to the public, although nauseous gases could be smelled in some places.

In Britain, scientists watched the aborted launch on a satellite link. Nick Flowers, a research student at the Mullard Space Science Laboratory of University College London, said: "When the explosion occurred, there was a tangible feeling of shock. We just sat there in silence. It is a loss for a generation of space scientists." Mr Flowers had hoped to complete his doctor of philosophy research degree using data gathered by the Cluster satellites.

Ian Taylor, the Government's minister for space, said: "We need to find out what went wrong. It is a great disappointment to all the scientists involved in the project." On 4 March, Mr Taylor had committed the British government to contributing pounds 2.8m to the further development costs of the Ariane-5.

Over the past decade, the other member countries of the European Space Agency have contributed about $7bn (pounds 4.6bn) to the Ariane-5 rocket. Britain did not participate until this year.

The Agency's commercial arm, the French-led company Arianespace, is responsible for the development of the rocket launchers. Backed by 53 European shareholders, mostly governments and state-run companies, Arianespace now dominates roughly 60 per cent of the pounds 1bn-a-year launch market.

Arianespace, which built its success on the more conventional Ariane 4, had staked its future on the squat new Ariane 5. Its unusual twin boosters were supposed to cut launch costs by 20 per cent by handling two bulky satellites at a time.

Arianespace's president, Claude Bigot, said the 87th satellite launch of the Ariane 4 would take place in eight days as planned. France's minister responsible for space, Francois Fillon, said last night that he was launching an inquiry which would report before 15 July and that the second launch of an Ariane-5 rocket, scheduled for September, would be postponed for several months.

Although the trail of debris superficially resembled the images from the explosion of the American space shuttle Challenger in 1986, yesterday's accident will be much less of a set back to Europe. A further 14 rockets are in the Arianespace production line. Providing the fault is not generic, the programme will not suffer too much.

"The major loss is to science and the Cluster mission," Mr Flowers said. The four identical satellites were designed to orbit the Earth and monitor the interaction between the stream of electrically charged particles flowing out from the Sun and the Earth's protective magnetic field, known as the magnetosphere.The rocket and its payload were not insured because "no commercial insurer would touch it", Mr Flowers said. "Science got it cheap, but it was risky. There was a sting in the tail."