M&S the latest victim as UK economy shudders to a halt
BRITAIN is on the brink of a biting recession that could last until 2011, it was claimed today - as Marks & Spencer became the latest company to announce bad news.
The retail giant shook the City - and highlighted the worsening gloom on the high street - as it revealed sales have plunged 5.3 per cent in the last three months.
The company, which posted annual profits of £1 billion eaerlier this year, saw its shares fall by more than a fifth following the announcement.
It came as Lord Harris of Peckham, the founder of Carpetright and one of Britain's leading businessman, warned that the high street is facing one of its toughest years since the 1950s.
As the fallout from the credit cruch worsens, Lord Harris claimed that the British economy is "in a mess" and could take years to recover.
He said: "We are in a very, very difficult market.
"I think the next year will be one of the most challenging in the past 50 years."
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The M&S update - a week earlier than expected - came as chief executive Sir Stuart Rose warned consumer confidence levels had “deteriorated markedly”.
M&S added that director of food Steven Esom, who joined from Waitrose just over a year ago, was leaving immediately after a “significantly weaker” performance from the food business.
Consumers have tightened their belts amid soaring fuel prices and are increasingly looking for cheaper food - meaning M&S is facing increased competition from supermarkets.
Sir Stuart said the current slowdown was the “third dab of the brakes” seen since last November.
M&S has around 21 million customers every week but the chief executive said the economy was in a “very uncomfortable place”.
Sir Stuart said: “Everybody is going to have to swallow hard and cut our cloth accordingly.
“We want to make sure that our business is fully equipped to meet the downturn, which is going to be longer and more hard-fought than first anticipated."
The City expects profits of around £870 million but analysts lowered their forecasts following the gloomy update. Pali International’s Nick Bubb predicted profits would fall to around £800 million this year.
But M&S were far from the worst hit as the nervous London market responded to the weakening economy.
Housebuilders were also punished after Taylor Wimpey - one of Britain's biggest builders - warned it had yet to secure some badly needed capital.
Taylor Wimpey’s shares nearly halved in value, falling 28.5p to 31.5p. The group is reportedly trying to secure £500 million of new equity to help shore up its balance sheet. Struggling Barratt was also heavily in the red, down 11.25p to 45.5p.
