LONDON BRIEFING:IS THE Tesco profits powerhouse finally running out of steam? Britain's biggest supermarkets group suffered a double blow yesterday – it reported its weakest Christmas trading in almost 20 years and authoritative industry figures revealed a slide in its market share over the past year, writes Fiona Walsh

At 2.5 per cent, sales growth at Tesco over the festive period was the slowest since the recession of the early 1990s, the group said.

That puts the country’s leading retailer well behind its food retail peers – Sainsbury’s last week reported a 4.5 per cent rise, while rival Morrisons is widely expected to announce a near double-digit jump when it reports later this month.

In terms of market share, both Asda and Morrisons made gains last year, according to data released last night by TNS Worldpanel. Asda’s share advanced by 0.2 points to 16.9 per cent, while Morrisons gained 0.4 points, taking its share of the grocery market to an all-time high of 11.9 per cent. Tesco, on the other hand, slid from 31.3 to 30.7 per cent.

The TNS figures give a clear demonstration of the defensive strengths of the food retail industry. As other retailers struggled to woo shoppers, the grocery market grew by a healthy 6 per cent in the 12 weeks to the end of December.

Other trends are also visible in the figures – the upmarket Waitrose chain owned by John Lewis saw its share slide from 3.9 to 3.7 per cent as cash-strapped shoppers traded down, while discounter Aldi pushed its share from 2.7 to 3.2 per cent.

Those figures are worth a closer look, however, as are Tesco’s. Remember that chancellor Alistair Darling slashed the VAT rate from 17.5 to 15 per cent in his pre-budget report in November in an effort to get Britain spending again.

The success of that move is open to debate, but if the VAT reduction is taken into account, then the real decline for the retail sector in December is a more modest 1.8 per cent or so.

Similarly at Tesco, if the VAT-effect is stripped out, underlying sales growth in the UK business was a much healthier 3.5 per cent, which is not that far behind rival Sainsbury’s 4.5 per cent. Tesco’s performance is all the more impressive given its far larger proportion of non-food sales, which have been far harder hit by the spending slowdown.

Tesco is also reporting from a significantly larger base – its profits will be pushing at the £3 billion barrier this year, more than the total sum likely to be produced by Asda, Sainsburys and Morrisons.

In the UK, the slowdown in sales growth is partly a reflection of the group’s decision to tackle cut-price competitors such as Aldi and Lidl head on. Last autumn, chief executive Sir Terry Leahy declared the group’s ambition to become “Britain’s biggest discounter”˜. That strategy has not won universal approval among retail analysts, some of whom fear it will simply cannibalise sales. But Tesco has a habit of getting things right – its sales may be lagging rivals now, but things could look different further into the recession.

Jobless figures heading for 3m

BARELY A day goes by now without news of major job losses, leaving little doubt that unemployment numbers are heading for three million and beyond this year. Monday was a particularly grim day on the employment front – even as Gordon Brown promised action at a “jobs summit,” thousands of jobs across the economy were axed or came under threat.

These included 700 posts at the earth-moving equipment group JCB, where only a few months ago employees voted to go on short-time working rather than see redundancies.

Around 900 jobs were cut at the logistics group Wincanton and auctioneer Christie’s warned of “significant” job losses to come. Furniture retailer Land of Leather collapsed into administration, putting 850 jobs under threat, as did the Findus firm Newcastle Productions, which employs 420.

Just about the only good news on the jobs front at the moment is coming from the supermarket chains – Morrisons announced on Monday that it will create 5,000 new jobs this year, matching the figure pledged by Sainsbury’s last week.

Tesco may be lagging behind in sales growth, but it outdid both its rivals yesterday, saying it planned to add 10,000 posts to its headcount in 2009.

• Fiona Walsh writes for the Guardian newspaper in London