Tesco is to open a distribution centre near Avonmouth, which will employ 750 people.

The new regional fresh food depot at Pilning, near the Second Severn Crossing, will serve stores in Wales, the South and the South West of England.

The facility replaces the nearby Chepstow distribution centre, which is to close.

Although the 747 staff at the existing Chepstow facility will be offered jobs at the new centre, some may decide not to move as the nine-mile journey between the two sites includes a trip across the Severn Bridge, at a cost of £5.40 per return journey.

Tesco is the latest big name to take up giant premises in the Severnside area, following John Lewis and drinks distributor Constellation Europe, which both signed leases for warehouses in Avonmouth in the last 18 months.

Tesco said the "state-of-the-art" warehouse would help it to serve its growing network of stores across the regions and improve service to customers and facilities for staff.

Tesco spokeswoman Juliette Bishop said the relocation was necessary because the company had outgrown its Chepstow base.

She said: "The site at Chepstow is almost 20 years old now and provides no room for expansion. However, the number of stores the site services has grown considerably in this time and it can no longer meet current or future demands.

"This new, state-of-the-art facility will allow us to greatly enhance the service to our stores and customers across Wales, the South and South West England."

She added: "We have worked extremely hard to find a new site just under nine miles away and the close proximity to Chepstow will allow for all of our staff to have the opportunity to take a role at the new facility, keeping more than 750 jobs in the area."

But the news will rock Chepstow, which is losing one of its major employers.

Michael German, Welsh Liberal Democrat AM for South Wales East described the move as a "real blow for the economy of Chepstow and South East Wales", after speaking with senior managers at Tesco yesterday.

He said: "It is a great disappointment Tesco found no alternative sites in the area to expand their distribution centre."

Mr German said: "My main fear is employees who transfer will have to travel to the new site in Avonmouth and face the £5.40 toll on the Severn Bridge every day, £27 per week.

"I have already pressed senior managers at Tesco to make a package available to compensate existing employees who face this huge hike in their travel to work costs."