FIRMS which refuse to make way for a new £10 million 'urban village' in Lancaster could be forced out, agreed councillors this week.

Major plans are in the pipeline to transform the industrial eyesore of Luneside East into a mixed-used development of housing, shops and industry.

But the city council has to acquire all the land before the site can be sold to a developer.

Cabinet members agreed this week to submit a draft compulsory purchase order to the Government - so it is ready to be issued if required.

"These are necessary changes to get under way with Lancaster's biggest single regeneration project," said Cllr Abbott Bryning, Cabinet member for regeneration.

"It does tend to concentrate the mind with those we are to negotiate with when a CPO is in place."

Cllr Jon Barry urged caution, warning: "A CPO gives the council an over-strong bargaining position.

"My concern is there are a lot of small businesses here. It is a regeneration project and the idea is that we create jobs but don't lose the ones we have."

John Donellon, corporate director for regeneration, stressed that an order would be a last resort: "Clearly the aim is to negotiate as much as possible. We don't want to see any business extinguished. We want to see them relocated."

About 25 businesses currently operate on the land - Mr Donellon said two of the large businesses had indicated they would consider moving.

If any business refuses to move and objects to a CPO, a public inquiry will be held some time next March or April.

The regeneration of Luneside East, at the far end of St George's Quay, is the flagship project for the Lancaster Economic Development Zone.

It has attracted cash from English Partnerships, Northwest Development Agency and European Regional Development Fund.

The land area also includes a gasholder station, owned by National Grid Transco. Negotiations with Transco started in 2000, and the company is updating a feasibility study into removing the gasholder.