Squeeze on consumer spending hits Tesco

Tesco will confirm a fall in UK sales this week, as cash-strapped consumers continue to rein in spending on big-ticket electricals.

It is expected to post a fall of up to 1 per cent in UK sales at stores open at least a year in the three months to 25 May. This would leave Tesco trailing Sainsbury's 3.6 per cent and Asda's 1.3 per cent recent growth but ahead of Morrisons' 1.8 per cent fall.

The figures will be a disappointment for chief executive Philip Clarke, as the supermarket's domestic business accounts for about two-thirds of group profit.

The UK's biggest retailer will also update the City on plans to sell its US business, Fresh & Easy, which Tesco is exiting after five years of heavy losses. While the smart money is on US retailers buying parcels of outlets in a break-up of the 199-store chain, the whole business could be sold to a rival.