A city centre post office could become a major department store.

The Ship Street branch in Brighton is set to be closed and moved to a corner of WH Smith in Churchill Square as part of cost-cutting measures by Post Office Ltd.

The announcement has provoked a storm of protest from traders in Brighton's commercial centre who claim businesses will suffer as a result of the move.

But Post Office Ltd says it has to sell the cavernous building, along with 75 other prime sites across the country, to help stem £70 million losses.

Now it has emerged the building could become a department store.

The site is identified in the local plan for possible redevelopment. The policy states that in the event of the post office relocating to another site in central Brighton, planning permission would be granted for retail on the ground floor.

Any department store would probably incorporate the TK Maxx site and four other stores, currently on short-term leases, which front on to North Street.

Although the Grade II listed building is not ideal, business leaders say it is likely to be the only chance to bring a new department store to Brighton in the foreseeable future.

Unusually for a city of its size, Brighton has just one department store, Debenhams in Churchill Square, following the closure of the Co-Op store in London Road.

House of Fraser has been mooted as a possible candidate for the Ship Street site.

Tony Mernagh, executive director of the Brighton and Hove Economic Partnership, said the potential redevelopment of the site represented a "silver lining" after Post Office Ltd's announcement, which would give North Street a much-needed lift.

He said: "It's unfortunate the post office is moving because, in my experience, when dedicated post office services move into shops the service is not as good.

"But the Post Office is in a state where it quite clearly needs to drag itself into the 21st Century and the sale of the Ship Street building was always a matter of when not if.

"North Street desperately needs a boost.

"It has been in a state of flux for seven years and a department store could be just the thing it needs.

"It is de facto the prime pitch in Brighton, acting as bridge between Churchill Square and The Lanes and North Laine, but it doesn't have the classy shops."

The post office moved into the Ship Street building less than three years ago. The staff of 22 employed there will either be able to apply for a position at WH Smith, move to another job with Royal Mail or take voluntary redundancy.

The relocation is expected to happen before the end of summer 2008.