Mr Austen, who took over as chief executive in April 1993, was employed on a three-year contract on a salary of pounds 192,000 last year. The terms of a severance payment have been finalised but Mr Cassidy was not prepared to disclose the amount of compensation, save that it would be less than Mr Austen's full contractual entitlement.
His replacement will be Ian Thomson, former head of Sears' British Shoe subsidiary and with 16 years experience of retailing in South Africa.
Liberty, which started life as a family-owned business in 1875, warned that profits before tax and exceptional items would not amount to more than pounds 2.1m for the year to January, compared with pounds 3.6m in the previous period. The size of a proposed "substantial" exceptional charge to cover the reorganisation of the group remained under wraps.
Mr Cassidy said the review, which has yet to be finalised, would aim at revitalising the Liberty brand internationally and at developing the retailing format at the group's flaship store on Regent Street.
The abrupt departure of Mr Austen suggests a deterioration in relations since he welcomed Mr Cassidy to the group nine months ago, saying: "Clearly he will be part-time as he has other responsibilities. He will have authority within the company, but he is not going to be running the company or any of its divisions."
In fact Mr Cassidy has taken a tight grip on the running of Liberty, with the resignation from the board yesterday of three directors, Tony Salem, John Pugh, and John Laflin, all of whom will, however, retain responsibility for former areas of control: retailing, finance and furnishings and fabrics.
There was no real surprise in the City, where Liberty's thinly traded shares closed only 3p lower at 303p.
The cut in the final dividend means the interim payment of 1.85p will be the total for the yearagainst last year's 7.2p payout. It had been held at that level since 1992, despite a steady decline in the group's profits.