Developers plan to demolish No. 1 St Helen's Square, a four-storey building with a ground-floor newsagent, the former public toilets, and Nos. 48-49 Newborough, a former two-storey coffee shop to create the new public realm space opposite the Grade II listed Market Hall.
In a heated meeting at Scarborough Spa earlier this afternoon, councillors voted to unanimously approve the proposal after earlier rejecting redevelopment of the neighbouring Argos building.
Cllr Bill Chatt, whose motion to approve planning permission was carried, said: "This is about community and is not contentious. This is one of those things that people are saying we would like to have."
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He said that the new square will help to "drag" people down to the Market Hall area from the pedestrian precinct outside the Brunswick, which he added "has always been an issue".
As part of the application, the cobbled street on St Helen's Square would be removed and replaced with alternative material and the road narrowed.
The Shakespeare pub would also be remodelled to include large, glass bi-fold doors to incorporate it into the space and seating arrangements and mobile planters installed, which can be rearranged.
Many opponents to the now-rejected Argos site development had called for a large public square that encompassed the entire area from Newborough to Market Street. The approved plans cover the corner area of Newborough and St Helen's Square.
Cllr Roberta Swiers said: "I think this area will benefit so much from this town square. It will bring trade right down the street and it will be of massive benefit and is well needed."
Historic England objected to plans on the basis of the demolition of No. 1 St Helen's Square. It said: "The loss of this building would be harmful to the special architectural and historic interest of the conservation area.
"Further, we consider that the archaeological interest of the area as the location of the former Carmelite Friary should be appropriately recognised and reflected on the proposals for the public realm."
Scarborough Council's Conservation Officer said the demolition of No.1 St Helen's Square would cause "substantial harm" to surrounding heritage assets.
At today's meeting councillors agreed that a recommendation should be made to salvage and reuse the cobbles, and the 14th-Century Carmelite Friary precinct wall which runs along the rear of the toilet block building, No.1 and The Shakespeare pub.
They also agreed a surface marking should be made of No.1 to recognise the site's history and an associated information board.
As part of the plans, North Yorkshire County Council's Highway Authority has confirmed that in addition to the pedestrianisation of St Helen’s Square, Globe Street would need to be changed to ‘one way’ from St Sepulchre Street to Eastborough.
The plan for a "public square" was recommended for approval by Scarborough Council's planning officers, subject to a number of conditions which include preserving and recording any heritage assets.