This is not just a drop in profits... it's a drop in M&S profits

This is a good example of the response of a relatively upmarket store to the collapse in consumer spending. Marks & Spencers is to slash the price of its clothing and food to take on the no-frills grocery and fashion stores. M&S announced the price-cutting drive today after half-year profits dropped by 34%. The main reason for the slump is their shoppers defecting to budget rivals due to the imminent recession in the UK. This is particularly acute with the recent performance of their food business where profits and market share are falling as rising food prices encouraged customers to trade down to cheaper stores as well as discounters such as Aldi. M&S will try to attract shoppers to its stores with a Christmas advertising campaign featuring boyband Take That and TV actor Robson Green as well as regular M&S faces Twiggy and Erin O'Connor.

As M&S chairman, Sir Stuart Rose, disclosed the slump, annual profits at the low-cost fashion retailer Primark bounced up by 17%, indicating that customers were prepared to pick up clothing – if the price was right. M&S indicated that it was planning to reduce the costs of hundreds of items, in attempt to match the public's desire for cheaper goods. "In the current market, customers are increasingly concerned about value and we know that we have to respond accordingly," he said.

Incidentally, the current sterling/euro exchange rate will mean the M&S reductions will be greater in Northern Ireland than the Republic.