DERBY has been left with an 8.5-acre headache following supermarket giant Tesco's decision to scrap plans for a new supermarket.
Yesterday, the troubled chain informed the city council that, because of its recent poor financial performance, it had decided to abandon its plan to build the 60,000 sq ft store in Osmaston Park Road, near Spider Island, Allenton.
The store, which would have been built on the site of Allenton Market, the Mitre pub, empty retail units and a handful of houses, would have created between 300 and 400 jobs.
But in a letter to Derby City Council leader Ranjit Banwait, Tesco chief executive Dave Lewis said that the firm was unable to proceed with the project.
Tesco had been planning to build the store in Osmaston Road for a number of years. It originally received permission for the development in 2011.
But it has decided not to push ahead with 49 planned developments – of which the Allenton store is one. It is understood that a proposed Tesco in Shirebrook in the north of the county has also been scrapped.
In his letter, Mr Lewis wrote: "As you will have read in the media, our performance as a business has fallen significantly short of where we would want it to be.
"As a result, the financial resources we have available for new investment are severely constrained and we have had to critically review all current and future investment decisions.
"It is with a heavy heart that I am announcing that we are unable to proceed with 49 new planned store developments across the country, including our planned store in Allenton.
"I am very sorry that we have not been able to deliver the investment that we intended.
"I know this news will be a real disappointment to many people in your community and we are extremely grateful for the support we have received for our plans."
The scheme could have seen the current outdoor Allenton Market, which has about 90 stalls, replaced with a permanent indoor one with 65.
Tesco said the building would have had a cafe and attractive public space outside.
But Andy Allsop, treasurer of Allenton Market Association, said: "They were going to open it every day instead of two or three days a week, there were going to be fewer stalls and it was going to be covered.
"Really it would have been like a little shopping centre which we didn't want.
"It's a traditional open-air market, the only one in Derby and we want it to stay that way.
"Tesco would have hit business for some of the smaller shops nearby and I think they will be pleased about it."
Blair Pepper, 76, who has lived in Osmaston Road, since 1961 said Tesco pulling out was "brilliant news".
He said: "The traffic would have been mayhem and it was going to be a 24-hour store so it would have been continual.
"They are already building an Aldi near here, there's a Co-op beyond Spider Island and one in Osmaston Road. Did we really need another supermarket?"
The question facing the city council now is what can be done with the site, parts of which have become an eyesore.
Tesco has said it plans to "work closely" with the council "to find the right solution".
Councillor Martin Rawson, deputy leader and cabinet member for planning, environment and regeneration, said: "We are extremely disappointed that plans for a new Tesco store at Allenton have been cancelled.
"We will continue to work with Tesco and other partners to try to find an alternative use for the site, as soon as possible."
When asked about the site, a spokeswoman forDerby Homes, the city council's social housing arm, said: "Derby Homes are working with Derby City Council to investigate all feasible options for the future provision of social housing."
Russell Rigby, of Derby-based commercial property specialists Rigby and Co, said: "It's a shame that Aldi have committed to a new store in Coleman Street. The Tesco site would have been preferable for discount food retailing.
"That said, I envisage a smaller scheme will be created eventually with probably some housing above the retail."
Tesco has had a traumatic last 12 months, which started with the revelations that it had overestimated its half-year profits by £250 million.
In a trading statement issued yesterday to the London Stock Exchange, Tesco announced a number of cost-cutting measures.
These included the closure of 43 unprofitable stores – a "significant proportion" of which will be convenience shops. It is not yet known if any of these are in Derby. It also intends to close its staff pension scheme.
TESCO TAKES ON COMPETITORS WITH 'NICER ENVIRONMENT IN-STORE
A DERBY business expert said bosses at Tesco were attempting to take on their competitors by creating "nicer environments" in their stores.
Charles Hancock, senior lecturer in marketing and sustainable business at the University of Derby, said he felt Tesco had faced "the biggest knocking over the last three years" of all the major supermarket chains.
But he said it appeared its bosses were taking action to impact on the threat from German discount supermarkets Aldi and Lidl.
Mr Hancock said: "The German discounters have swiftly taken market share and seized the opportunity during the period of recession – offering customers food at an affordable price.
"The larger supermarkets will have to work hard on their relationships with suppliers to maintain good prices and ensure they can meet customers' demands, because the customer has shown they are shifting allegiance and shopping around.
"Tesco is shifting its offer and now providing nicer physical environments, stepping it above the other stores. Their fruit and vegetable offerings now resembles a market stall and they have also reorganised their home offerings with much more of a department store feel.
"These differences are where Tesco is taking on both its immediate competition and the recent German stores – by differentiating itself.
"The drop in petrol prices will also draw the customers back to the large stores, with customers opting to take advantage of the discounts – especially with Tesco's saving of up to 20p per litre."
But Mr Hancock said Tesco were not alone in the supermarket price war. It comes after Asda said it would commit £300 million to lowering prices in the first quarter of 2015, while Sainsbury's said it would lower prices on 1,000 products by investing £150 million this year.
Mr Hancock said: "The large supermarkets have been hit hard by the smaller German stores and there has been a shift in the customer base. Many new customers who previously wouldn't have shopped in Aldi or Lidl have swapped allegiance, enjoying the cost discounts available for quality produce.
"These stores have undercut the large-format superstores by keeping operational costs low, with less frills in terms of the physical environment – but providing the customer with what is needed since money in the pocket has been tight over the last three years.
"But, going forward this year, I think people will shift to shopping both in the discounted stores – yet also maintain their shopping in the larger supermarkets."
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