A hydrodynamic model is developed for the Blackwater estuary (UK) and used to estimate nitrate removal by denitrification. Using the model, sediment analysis and estimates of sedimentation rates, we estimate changes in estuarine denitrification and intertidal carbon and nutrient storage and associated value of habitat created under a scenario of extensive managed realignment. We then use this information, together with engineering and land costs, to conduct a cost benefit analysis of the managed realignment. This demonstrates that over a 50-100 year timescale the value of the habitat created and carbon buried is sufficient to make the large scale managed realignment cost effective. The analysis reveals that carbon and nutrient storage plus habitat creation represent major and quantifiable benefits of realignment. The methodology described here can be readily transferred to other coastal systems. © 2007 Elsevier Ltd. All rights reserved.