A decision to award a £120,000 recycling contract to waste firm Sita could spell the end of city-based co-op Magpie, councillors fear.

Brighton and Hove City Council's ruling Cabinet approved a deal yesterday, which will see Sita run a pilot door-to-door recycling scheme for 11,000 homes.

Officers advised Cabinet members to choose Sita, which made a marginally cheaper bid than Magpie, to operate the six-month trial.

The 11-year-old community co-op was used as an example of the type of business that should be supported when the council drew up its sustainability strategy.

Labour councillor Joyce Edmond Smith said Magpie, which already collects a range of recyclables, could lose customers to Sita, which would only collect paper during the pilot period.

She said: "I am extremely surprised that after adopting a sustainability strategy, which specifically mentioned helping local businesses become more sustainable, we seem to be taking a route that will make it difficult for Magpie to survive."

Green councillor Keith Taylor said: "This is a kick in the teeth for Magpie, a respected Brighton product. This is another case of the contradictions of what the council says and what the council does."

Councils are being forced to operate door-to-door recycling schemes as part of the National Waste Strategy.

The Brighton and Hove one could be extended to the whole city if the trial proves successful.

Liberal Democrat Paul Elgood said Magpie had a good reputation for door-to-door recycling, while Sita's record since it took over refuse collection in the city was poor.

He said: "We will be very angry if the trial fails for any reason other than the public not wanting the service."

Magpie spokesman Jock Ledger said the co-operative, which employs 30 people, was very disappointed not to have been awarded the contract.

He said its multi-material collection scheme would continue.