A SUPERMARKET has axed jobs as it battles against a new multi-million Tesco store, which has opened nearby.

The opening of Tesco, in Chester-le-Street market place, has hit business at the Co-op, only five minutes walk away in the St Cuthbert's Walk shopping arcade.

When Tesco applied for planning permission for the store five years ago, the Co-op applied for a judicial review of the proposal, arguing a major food store would threaten its branch with closure.

The application was turned down at the High Court and building work went ahead, with the rival chain opening on September 1.

Now, only two months on, the Chester-le-Street Co-op is assessing the impact of its new neighbour.

Sales are down by a quarter, although the store insists that this is not as bad as it had expected.

Company spokesman Steve Warren, said: "It has had an impact as you would expect, but nothing like what it could have been.

"Sales have gone down by 25 per cent. It's quite a big chunk of sales. But it could have been a lot worse, when we have a large superstore operating a few yards away.

"We still have a profitable, very successful store."

Three jobs have been axed. One of the employees has found alternative employment, and the chain is looking for two other positions for the remaining two workers.

A further seven people have had their hours adjusted since the superstore opened.

Mr Warren said a number of initiatives had lessened the impact Tesco had had on sales.

Several months ago, North Eastern Co-op invested £250,000 in its Chester-le-Street store, branding it with the Chester-le-Street name and redesigning the interior.

Mr Warren said they felt the store had retained its customers with a loyalty campaign, which gives shoppers discounts.

Many people and organisations in the town, including Chester-le-Street District Council, had welcomed the Tesco store, saying prior to its arrival the majority of people were leaving the town to do their main food shopping.