If approved, the six-storey Corn Exchange, which has been a fixture in the city centre since 1964, would be replaced by a café for al fresco dining and a piazza that would host city festivities.

Retractable bollards and stone benches would frame the southern edge of what would be known as St John's Square to put an end to ongoing problems of cars and vans clogging up Exchange Street and Queen Street.

Due to be completed by the end of 2009, the transformation is set to be one of the first visual signs of Peterborough's regeneration.

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Today, council leader councillor John Peach said: "We want to get on with the work as quickly as possible. People talk about regeneration and now we are delivering that regeneration.

"Although there are lots of things happening, such as the development of a university and the Carbon Challenge estate, this will be one of the most visual steps forward. We hope that it will be the catalyst for our future plans."

The five tenants of the Corn Exchange – the Post Office, Quest Employment, The Square hair salon, Bairstow Eves estate agent and Bin Ends – were told about proposals to demolish the building in November, and the council is consulting with the businesses to help them find new premises.

Justifying demolition, a design and access statement that has been submitted to the council's own planning department as part of the planning application, said: "The Corn Exchange building employs 50 people in a variety of office and retail jobs.

"Although the removal of this building will result in the loss of retail and employment space, the re-location of these businesses in the city and the benefits of creating a public square outweigh the loss."

The design and access statement goes on to say: "The creation of a public square through the demolition of the Corn Exchange will provide much-needed new public space within the city centre.

"The new public square will be a multi-purpose meeting point, acting as a place for informal recreation and possibly for hosting city events and activities."

READ ET COMMENT: Talking about regeneration

The Corn Exchange must be demolished by July 2010 as part of an agreement with English Partnerships, which purchased the building on behalf of the council and Opportunity Peterborough in a £2.7 million deal in June 2007.

If demolition has not happened before that date, the Corn Exchange would have to be put back on the market.

The planning application can be viewed at the council's Bridge House offices, Town Bridge, on weekdays between 9am and 5pm.