The Co-operative Group says it is proposing to shut Castle House, apart from the food hall, travel agency and post office, because it can no longer compete with other department stores and wants to "focus on its core markets".

Non-food departments at its stores in Middlewood Road, Hillsborough, and at Drakehouse retail park, are also closing, along with its warehouse and delivery operation at Old Lane, Halfway.

Dismayed business leaders and politicians say they will be approaching the company to ask if there is any way the stores can be saved.

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A Co-op spokesman said the decision had been taken with regret. The three department stores are the only such outlets operated by the group in Sheffield.

He added: "We simply do not have the critical mass required in today's competitive department store sector to justify the required further investment in these stores."

Post offices at Castle House and Hillsborough, plus food halls, travel agencies, and pharmacies at each of the stores, will stay open.

But the Co-op has not revealed whether it will keep its operations at the current buildings or if they will be moved elsewhere.

If so, the markets area – once one of Sheffield's main city centre shopping hubs and home to the Co-op since 1929 – will have few stores left.

The markets themselves are moving to The Moor and the area is earmarked for major redevelopment.

About 50 of the 130 employees whose jobs are under threat by the Co-op closures are full time and the remaining 80 part time. The company has promised "efforts will be made" to find workers alternative employment.

The stores are to close in the spring, following a consultation period with staff and trade unions.

The warehouse and delivery operation will operate "until all customer orders have been fulfilled".

The announcement follows a review of stores which resulted from the recent merger of Sheffield Co-op with United Co-op, which have since been incorporated into the main Co-operative Group.

One member of staff said: "This will be the end of an era for many people and a lot of the staff are very bitter at what has happened."

Nigel Tomlinson, chief executive of Sheffield Chamber of Commerce, said: "I had not seen this coming and it's sad news. But there has been a bit of a shift in retail towards the other end of the city centre and it looks like the Co-op has been an unfortunate casualty.

"It'll now be a question of having discussions with the Co-op and ascertaining whether there is a way forward.

"I think it would be nice if a business like this could be saved but I don't think the Co-op will have taken their decision lightly."

Coun Tim Rippon, Sheffield Council cabinet member for culture, economic regeneration and planning, said: "It's regrettable that there are to be job losses and I would ask that the Co-op look again at their business and if there is any way the closures could be avoided."

Coun Rippon added that although the markets area is earmarked for office and commercial development as part of the city centre regeneration, he had "no idea" the future of Castle House was at risk and the site had not been included in any development plans.

Sheffield Heeley MP Meg Munn said: "The Co-op has a very long history in the city but they have to make their decision on a commercial basis.

"I want to look carefully at all the information and why this proposal is being put forward."

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