Supermarkets handed fresh blow as sales fall to below the £100bn level

Food retail revenues dropped by 3 per cent to £99 billion in the second quarter, according to The Share Centre’s Profit Watch UK study, with overall revenues of UK plc slipping 2 per cent to £341.7 billion over the period.

The big four grocers have been struggling to protect their market share from the rise of German discounters Aldi and Lidl. Meanwhile, the UK launch of online grocery service AmazonFresh in June looks set to make the grocery sector even tougher.

Helal Miah, investment research analyst at The Share Centre, said intense price pressure led to a tough year for UK supermarkets, while companies exposed to UK consumer spending enjoyed a fillip from a “burgeoning” UK economy.

But he said the lift will be short lived as uncertainty triggered by the EU referendum result takes its toll on economic growth.

“The implications of the economic slowdown will mean lower demand for sectors such as housebuilders and retailers, while the travel industry is already feeling the effects.

Financial services may suffer too, if passporting to the EU fall by the wayside. Profits in these sectors will be harder to come by in Brexit Britain.”

The report said the food retail sector and blue-chip miners dealt a blow to the overall operating profits of UK plc, causing it to drop.

However, pre-tax profits for UK plc jumped by more than 44 per cent, as a swathe of asset write-downs in mining, oil and food retailing came to an end.