Plans for the £77m transformation of Penrith town centre in Cumbria are back on track after Eden District Council (EDC) agreed a deal with supermarket Sainsbury's to revise the delayed project.

The Penrith New Squares scheme will now be carried out in two phases, with the first stage set to include a new town square, a landscaped pedestrian link to Princes Street and a new supermarket, as well as a residential development. The second and third phases will include retail and residential schemes. Improvement works will also be carried out at Wetheriggs Country Park to provide picnic areas, surfaced paths and a sustainable woodland, while a new football stadium for Penrith AFC at Frenchfield Sports Centre is due for completion within the next few weeks.

EDC leader Colin Nineham said: "Everyone has had to make compromises on the scheme to achieve an outcome. We believe that what has been agreed is the best for Eden, the local economy and will provide an improved retail offer in the town." Representatives from Penrith AFC and EDC leader Colin Nineham (right) mark the restart of work at Frenchfield Sports Centre

The council's chief executive, Kevin Douglas, added: "With the need for significant extra financial input into the scheme over and above their current investment, the increased supermarket is the financial anchor to ensure the scheme goes forward. "However, there will be no overall increase on the original total level of retail agreed, as other areas of the scheme will be reduced to stay within the agreed planning permission."

Developer Lowther Manelli is behind the development, which was suspended in October 2008 after the National Australia Bank withdrew funding due to the recession.