Plans have moved forward to transform a landmark Sheffield building into an innovation hub for the city's creative and digital sector.

A £3m funding deal between Sheffield City Council and regeneration company U+I has been completed, paving the way for a new digital incubator to be opened at Castle House, the 1960s former Co-op department store at Castlegate.

The refurbishment of the Grade II-listed building and the fit-out of the new facility is expected to be complete and ready for occupation in early 2019.

U+I, which owns the building, has appointed Kollider Projects as the delivery partner for the new facility, which will offer co-working facilities and a range of business support services.

"We are delighted to have completed this deal and look forward to working with our partners to creating an vibrant, collaborative and economically important destination at Castle House," said Richard Upton, deputy CEO of U+I.

"Partnerships with local councils when properly constructed can deliver real benefit and value to local communities and the business which work in them. I am convinced the refurbishment of Castle House will be a catalyst for the wider regeneration of Castlegate."

Margot James, minister for digital and the creative industries, added: "We are determined to make the UK the best place in the world to start and grow a digital business, and this new tech hub will give Sheffield's cutting-edge creative and digital businesses a fantastic space to collaborate and innovate.

"We want to see the whole country benefit from the digital economy and our funding will not only boost the city's thriving tech scene but also provide opportunities for firms right across the Northern Powerhouse."

Sheffield City Council was granted more than £3m funding by the Department of Culture, Media and Sport (DCMS) in 2015 to establish a new facility providing work space, business incubation and other services for entrepreneurs and SMEs who rely on digital technologies and their applications.

Following a competitive process the bulk of this funding has been awarded to the Castle House project.

Sheffield has an ambitious and expanding digital tech sector with over 18,000 companies across the city region and generating more than £1.3bn in sales.