There had been concern the ambitious project might have become a major casualty of the economic downturn, but Lend Lease’s general manager for Overgate, Karen Stewart, said, “Lend Lease is working closely with Dundee City Council to progress the proposed extension.

“In this challenging market we will continue to work with our investors, retailers and other partners to enhance Overgate and realise the potential Dundee has to offer as a premier retail destination in Scotland in years to come.”

Building projects all over the UK, both residential and commercial, have been put on hold or scrapped amidst fears houses will remain unsold and shop units unlet.

The construction industry has so far been one of the biggest casualties of the credit crunch but it has also bitten deeply into the retail industry with several high street names, including Woolworths and Zavvi, either closing altogether or going into administration towards the end of last year.

The Overgate extension will increase the size of the centre by just over half — the equivalent of another two Debenhams stores — and require a leap of faith by the developers, who will have to find tenants for many new shop units.

However, Lend Lease and Dundee City Council have entered into a legal agreement which allows for the development of land adjoining the shopping centre and the site of the proposed 215,00 sq ft extension.

The company said that under the terms of the deal, the council will acquire various land interests, which will be leased to Overgate to facilitate the expansion.

It remained unclear today what is happening with existing premises in the area, including those occupied by the Salvation Army, budget supermarket chain Lidl and a windscreen replacement outlet.

Lend Lease has already received the go-ahead from the Scottish Government for an extension that would increase the size of the centre by just over 50%.

An extension was first mooted about three years ago, but the scale of the proposal, along with other matters, meant it had to be referred to the then Scottish Executive for approval.

That was forthcoming in April, 2006, and Lend Lease and the council have since been working behind the scenes to make the extension possible.

If it goes ahead in the form originally proposed by Lend Lease, the extension would see 40 new shops, a food hall, an extension to two existing retail units and an extra 330 parking spaces. The project would mean the creation of 400 construction jobs during a two-year building period and 500-600 more long-term jobs.