A TREND-SETTING department store in the Tees Valley has announced plans to develop a five-star hotel.

An extra floor will be built on to the award-winning Psyche designer store, in Middlesbrough's Linthorpe Road, to accommodate the £2m, 24-room hotel.

The investment is on top of the £2m being spent on the development of a 400-seat top-floor restaurant, a pavement caf and an exterior glass elevator.

The plans will create more than 30 jobs. Psyche already employs 100 people.

The news came as the company showed it had bucked retail trends, with sales of ladies and menswear up nine per cent and childrenswear up 36 per cent this year compared to last.

The store sells 150 clothing and sportswear brands, has a record store, caf, hairdressers, nail bar and salon.

Owner Steve Cochrane, who was the subject of the BBC's documentary series The Secret Life of the Shop, said: "Retail is having a very hard time at the moment, but although we are finding that footfall is down, the people coming into the store are spending more money.

"Since opening three years ago, we have never stopped developing and it is only now that Psyche is starting to feel complete."

He said the design of the hotel would be unique, "based on urban living pods".

Mr Cochrane is planning to have the ground-floor pavement cafe re-fitted and opened in the spring and the restaurant open by the summer.

There are also plans to build a glass atrium on the store's top floor to take advantage of the views of the city and the Cleveland Hills.

Middlesbrough Mayor Ray Mallon said: "High-quality retail, leisure and hotel facilities are vital to Middlesbrough's image, economy and future.

"We must have more quality developments to sustain the growth and success of the town centre.

"Psyche is an international best seller and we are about to read a new and exciting chapter in its story."