THE £12m redevelopment of a key Derby city centre site is on hold for several months while planning permission is finalised.

And developer Blueprint has warned that construction on the old Prince's site, in Bold Lane, which is scheduled to begin in August, may be further delayed if the credit crunch worsens.

The company began demolition on the site last month to make way for shops, cafes, restaurants, and 25 flats with eco-friendly roof gardens.

But this stopped because it needed planning permission to partially knock down a wall which the old supermarket shares with two protected buildings.

Numbers 26 and 29 St Mary's Gate are Grade-II listed buildings and occupied by city council social services.

The authority resolved to grant Blueprint planning permission to partially knock the wall down and create a walkway between the new site and the Edwardian buildings.

But the terms of this agreement have not been finalised.

Peter Connolly, Blueprint's project director, said the demolition, which was due to finish this month, could be delayed until Christmas.

He said: "We had started the demolition but had to suspend it pending these further agreements being signed. As soon as we've got that we will complete the demolition works and look to start on site in about August next year."

But Mr Connolly said the credit crunch could cause further delays.

Nottingham-based Blueprint is half-owned by the East Midlands Development Agency and English Partnerships, the Government's national regeneration agency, but the Bold Lane project is funded entirely by private investment.

Mr Connolly said: "The economy has had an effect on how easy it would be to fill the units.

"We are committed to getting the demolition works finished. Once that is done we will go back to our board and discuss the next step.

"At the moment, consumer confidence in Derby is still relatively buoyant but if it the economy continues on a downward slope we may think about delaying the project until the situation improves.

"The project would not be shelved, it would just be a case of asking whether we should build at that time."

Ian Woodhead, group leader in the city council's planning department, said legal issues needed to be ironed out before Blueprint could proceed.

He said: "There is a resolution to grant planning permission but the final agreement has not been made. We would hope to get the legal issues sorted before Christmas."

Derby Cityscape chief executive John Cadwallader said he hoped the development would be completed as soon as possible.

Meanwhile, plans from developer Clowes Westerman to build new shops in the Cathedral Quarter's St James's Yard remain on hold.

Andrew Bock, the company's development director, said an upturn in retail sales was needed before the project could go ahead.

He said: "We will meet to discuss the project again in about a year's time. We certainly haven't gone through 10 years of putting the project together and getting planning consent just to give up on it."