NESTLE Rowntree's York factory site is set to be divided up as part of the company's dramatic redevelopment scheme.

Company boss Paul Grimwood, speaking after the company announced the devastating loss of 645 jobs from York, said the 170-acre complex was a "factory of two halves."

On one side of the site, closest to the city centre, are the original 19th century brick buildings on several storeys, built by Rowntree, which are outdated and expensive to run. On the other side were modern, purpose-built buildings, mostly constructed since Nestle took over Rowntree in the late 1980s.

Now a line is being drawn across the site to separate the two halves.

To the south the land - comprising 40 per cent of the whole site - is to be sold off and, subject to planning permission, redeveloped, with offices, retail and residential properties. The scheme could create 300 jobs, said Mr Grimwood - a number similar to the approximate number of Nestle staff who may be made compulsorily redundant after volunteers and people taking early retirements are taken into consideration.

To the north, stretching into the countryside, factory extensions, new equipment and production lines are planned, which would produce the five remaining Nestle products still being made in York - KitKat, Polo, Milky Bar, Yorkie and Aero.

Office staff currently working in an office block on the site to be sold would move into an existing block facing onto Haxby Road.

The money raised through the land sale would go towards a £20million investment in this part of the site, which Mr Grimwood pledged would safeguard the long-term employment of more than 1,800 remaining employees.

"We are here to stay," he said. "This is an alternative to closure. Our hand is forced by how the market changes.

"Our major competitors, such as Mars and Cadburys, have changed the rules of the game. You only have to look at what happened with Terry's - the Victorian building could not be made viable.

"Our decision is slightly different. We have a long history and heritage here. We have invested heavily in the past and will invest heavily in the future and, working with the city, want to make sure we safeguard that future. This basically gives us a strong basis for the future and it shows we are committed to the future here.

Mr Grimwood also revealed that York is to stop making several iconic Rowntree brands, including Smarties - the production of which will transfer to Hamburg, in Germany.

The redundancies come less than a week after Norwich Union announced 450 job losses in York, making it the city's darkest hour since the carriageworks closed in the mid-1990s with the loss of the remaining 750 jobs.

Mr Grimwood said it was hoped that at least half the job losses could be achieved through voluntary redundancy or early retirement.

He said he had "certain regrets" about Smarties leaving York, but said he needed to ensure they remained available to buy, with long-term investment in the brand.

He said: "If you don't act, you basically see your brand go into decline and extinction. There's loads of brands in the UK which were once iconic and now don't exist anymore."

The 43-year-old, who hails from York, told of his amazement late last year at returning to the city as managing director to save the chocolate factory.

"I used to drive past this gate every day on my way to school, and it always seemed such a huge business," he said.

"Nestle Rowntree is the second thing after York Minster that everyone mentions about York, so to be asked to come back from Switzerland to try and improve the overall operation and give the business a long-term future was something I was very pleased to do."