RADICAL proposals to allow the building of new shops in Walthamstow Town Square and create a smaller Arcade site development to compensate for the loss of public space are to be considered by the council.

A report by the authority has suggested a smaller complex on the Arcade site would be completed more quickly than previous plans and that more retail outlets in the centre of Walthamstow would be popular with traders.

It also claims that some retailers had previously been reluctant to sign up to the regeneration of the Arcade site because they perceived it as being too far away from the Mall shopping complex.

Last night cabinet agreed to launch a review into its town centre policy framework, which would include an examination of the possibility of enlarging the Mall, or even constructing retail buildings in the town square, with "additional or compensatory" public space earmarked for the Arcade site.

Developers St Modwen, which previously submitted controversial plans for a tower including homes, shops and community facilities on the Arcade site, have now been given a deadline of this Friday to come up with proposals for a smaller development which would leave part of the land free for the public.

A local group Fight the Height protested against the plans and the company eventually pulled out of the scheme when the property market collapsed.

A subsequent plan for a £30 million publicly funded scheme was also ditched and the site was re-opened to the public.

The proposals come after St Modwen told the council it had received interest from businesses such as the Vue cinema chain for a new development on the site, but that the "profit threshold" was still not enough for it to push ahead with the plans.

The authority could now go back to the private market to seek an alternative developer if St Modwen’s plans are not deemed suitable.

Caramel Quin, co-founder of Fight the Height, cautiously welcomed the council's decision to go back to the drawing board.

She said: "It's good news that the council is returning to the IPPF [Interim Planning Policy Framework] because the last time they didn't even consider the Arcade site in the plans because the deal with St Modwen was seen as a fait accompli.

"This is a real opportunity for the council to consult with residents fully for a change.

"But if we see a new proposal from St Modwen I fear it's going to be a case of spot the difference from their last plans. I just hope what they come up with will be more in keeping with the local area."

A council report states: "It has become clear throughout the term of the existing development agreement with St Modwen that potential occupiers [of the Arcade site] have been reticent in being located away from the core retail area of Walthamstow's town centre.

"Discussions with representatives of the Mall Corporation, owners of Selborne Walk, have indicated that retailers, however, remain interested in being located within or adjacent to the existing shopping centre.

"The paucity of available units within Selborne Walk would support this view but the existing IPPF does not envisage (or therefore support) further development in this location."

The papers continue: “Officers are therefore proposing to revisit the Town Centre's IPFF with a view to extending the possibilities of development at the eastern end of Selborne Walk thereby giving the council the flexibility to consider new proposals in the light of changing market and economic conditions.

“Consideration would be given to redevelopment to [sic], or adjacent to, Selborne Walk. This may include utilizing some of the existing open/public space in this area.

"To ensure there is no overall loss of open/public space within the town centre it would be proposed that additional/compensatory space could be located on the existing Arcade site."

The review into changes to the town centre and any development of the Arcade site will include a consultation with the public, possibly in September, the report says.

The Arcade site has been vacant for ten years following a number of failed development schemes.