End of an era as Leahy to quit

He will be replaced by internal candidate Philip Clarke, who rose from a part-time shop-floor job in his schooldays to head of Tesco's international businesses in Asia and Europe.

Mr Leahy will step down in March 2011 at the age of 55 after 14 years as chief executive, having led the group to dominate the retail market in the UK.

Analysts said Mr Leahy's departure was akin to Sir Alex Ferguson retiring as manager of Manchester United – representing the change of an era.

The move was two or three years before analysts had expected. "The surprise is there is still quite a lot of unfinished business," said Seymour Pierce's Freddie George.

However analysts applauded the appointment of Mr Clarke, only the sixth chief executive in Tesco's 91-year history.

The son of a Tesco store manager described by one company insider as "a personable guy, not a publicity seeker", Mr Clarke is in the same mould of Mr Leahy.

Mr Leahy said: "I feel my work is almost complete. We're coming out of a difficult recession which I've steered the business through.

"By March 2011 we'll be into a strong recovery and that's a good time for a new team to take over."

Mr Leahy said he is confident loss-making US chain Fresh & Easy will be a success once its western American heartlands exit recession.

Once he leaves Tesco, Mr Leahy said he would concentrate on private investments not focused on retail.

He declined to say whether he might take a political position if offered one.

"My interests will be around business generally, both here and abroad," he said.

Mr Leahy's resignation comes at a time of change for Britain's top supermarket groups, with Andy Clarke recently taking over at the country's second-biggest chain Leeds-based Asda and Dalton Philips coming into the fourth biggest, Bradford-based Morrisons.