The Co-operative Group todayunced plans to sell off and close all its department stores as part of plans to get out of the loss making sector.

It said it would close ten department stores and sell off 26 - including two in Bishop Auckland and Chester-le-Street, County Durham. Any of the 26 department stores - which also include two in Gateshead and Newcastle - remaining unsold by February 2007 would be closed down, the Co-op said.

But traders and politicians last night warned the closures would rip the heart out of the two market towns. Paul Wilson, chairman of the Bishop Auckland Traders Association, said if the Co-op department store was to close, Bishop Auckland was at risk of becoming a ghost town.

He urged people to start shopping in the town more - or they would lose their local facilities.

And Bishop Auckland MP Helen Goodman said she was seeking a meeting with Co-op bosses to highlight how important the store was to the town.

She said: "I am very sorry to hear of these developments.

"It is disappointing news for Bishop Auckland town centre and the surrounding communities.

"I am seeking a meeting with the Co-op to see if they will modify their plans because this store has provided an important service to a lot of people spanning three centuries.

"Clearly the Bishop Auckland store is here until February 2007 which gives us time to look at the options."

The Co-op said the Anglia Regional Co-operative Society - already a major department store operator - wanted to acquire a number of the sites.

But it is not clear if it is interested in the stores in Bishop Auckland and Chester-le-Street. The Co-op has 1,700 food stores, as well as travel agencies, 300 pharmacies and 500 branches which arrange thousands of funerals every year.

The group said the department store division lost more than £4 million last year and had a history of poor performance.

Deputy chief executive Paul Hewitt said the decision was made with ''much regret'' but the disposal of the stores would enable proceeds to be invested elsewhere.

He said: ''We will be closing the 10 biggest loss makers next February and we hope to be able to find buyers for as many of the remaining stores as we can. We will do everything we can to help those left without jobs find alternative employment.''

The Co-op employs more than 1,000 full and part-time staff across its 36 department stores.