Newcastle City Council will borrow almost £8 million to help pay for a major redevelopment of Eldon Square.

It has emerged that the local authority, which holds a 40 per cent stake in the shopping centre, is set to take out a multi-million-pound loan as it takes on a share of the costs for a huge overhaul of the site.

£65 million plans were approved earlier this year that will see both the disused former Eldon Leisure Centre and the top floor of the vacant Debenhams turned into new food, drink, culture, leisure and entertainment spaces.

Eldon Square’s redevelopment will also see Next move from its existing spot into two floors of the flagship Debenhams unit and beauty brand Sephora arrive in the city, with that due to open later this year.

A Newcastle City Council report this week also reveals that the existing River Island is set to upsize into the closed-down Topshop store.

Members of the local authority’s finance and budget scrutiny committee were told that the council, which has warned that it must find £60 million worth of budget savings by 2027, would borrow £7.8 million to help pay for the changes at Eldon Square.

Paul Stewart, the civic centre’s head of property, said that the decision was justified as the new shop lettings are expected to generate an annual £1 million return.

Eldon Square has endured a turbulent few years that has seen its former owner Intu collapse and the centre’s value plummet – with shops closing down as Covid-19 took a heavy toll and added to longer-term concerns about the future of high street retail.

Intu Debenture’s most recent financial accounts, for 2022, put the valuation of Eldon Square at £71.2 million – down from £93.2 million the year before. 

Mr Stewart told Tuesday’s committee meeting that the loss of Debenhams had been a “big challenge” for Eldon Square and that the move to relocate Next to that space was “very good news”.

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A council spokesperson added: “Eldon Square is a significant shopping centre in the heart of our city and provides employment for around 2,000 people.  A further 200 off-site jobs are also supported elsewhere in Newcastle, it plays a vital role in the local labour market.

“With our partners we have announced some exciting plans to diversify its offer with more leisure and entertainment complimenting great new international retailers such as Sephora.

“In order to assist with the transformation of the centre, the council is investing £7.8m following a robust business case. This will improve access and assist with broadening what the centre has to offer to the public safeguarding its future and maintaining its popularity.”

Eldon Square was contacted for a comment.

Under the redevelopment plan, the top floor of the ex-Debenhams unit will be given new life as a venue for live music and theatre, a bar and dining area, an outdoor roof terrace, street food stalls and a microbrewery.

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The second part of the project involves a substantial redesign of the former Eldon Leisure Centre, which could involve the installation of activities such as an electric go karting circuit, batting nets, mini golf, bowling and virtual reality games.

An outdoor terrace garden overlooking Blackett Street and Old Eldon Square will also be created.

It is hoped that the revival of those disused parts of the shopping centre will create or sustain more than 900 jobs and deliver a substantial boost to the city centre.