An £80 million regeneration of a city fruit and vegetable market could be back on track.

The original plan for the Circus Street site in Brighton for 200 homes, shops and a library, fell through when the credit crunch hit.

But now Brighton and Hove City Council said it has struck a “more financially viable” agreement with developer Cathedral Group.

Under the new terms new homes would still be built as well as accommodation for 400 students and reduced office space.

The council claims the revised plan would create 170 full-time jobs and give a £150 million injection into the local economy over ten years.

The site – which encompasses the former wholesale fruit and vegetable market, NCP car park and University of Brighton’s Circus Street annexe – will also include offices, a new library for the university, shops and a dance studio.

Council leader Bill Randall said: “Times are tough but we’re working hard to get developments going.

"These changes reflect current market conditions and the city’s high demand for housing and student accommodation.”

As the site is regenerated Coun Randall said it would bring in more than 100 construction jobs.

He said: “This project will create about 140 full-time construction jobs, many of those will be apprenticeships for our young people.

“Reducing office space would give us much-needed easy-to-let accommodation and allow us to meet the city’s really high demand for student housing.

“Purpose-built student housing is very important as it frees up family homes elsewhere.”

A new public square would also be built and a “much-improved” street scene.

Julian Crampton, University of Brighton vice-chancellor, said: “We have long been active supporters of the need to regenerate this area of the city.

“The redevelopment of the site will enable us to enhance the activities and presence of the University of Brighton’s Faculty of Arts, and signals a major investment by the university in the creative, cultural and digital sector for the city.”

Councillors are expected to authorise officers to proceed with the agreement at a cabinet meeting on Thursday.

Developers hope to start work in June 2013, after a planning application for the development is put in later this year.

The library and other university accommodation would be completed during the 2014/2015 academic year.