Profit forecasts for some of Britain's biggest retailers have tumbled over the past year by nearly 30 per cent amid growing fears about the economy.

City analysts were predicting last year that Marks & Spencer would generate pre-tax profits of £1.2 billion in 2008-09. The present consensus forecast is £872 million, a drop of 27 per cent.

Forecasts for Next have fallen by 20 per cent in the past year, while Kingfisher is expected to generate pre-tax profits of £376 million in 2008-09, against predictions of £494 million a year ago.

Kaupthing is the latest investment bank to cut forecasts for the retail sector. Matthew McEachran, its retail analyst, said that stores may be forced into rights issues, or disposals.

Greg Lawless, a Blue Oar Securities analyst, said: “People are worried that not all the bad news has been factored into forecasts. No one knows what the full extent of the downturn will be.”

Grant Thornton, the financial adviser, said that the number of negative trading statements issued by retailers on the London Stock Exchange between March and July was the highest level since the beginning of 2005.

David Bush, head of Grant Thornton's retail services team, said: “This quarter's analysis highlights how fast retail confidence has declined and there is little likelihood of a significant turnaround in the short term.”

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