One of the UK’s biggest supermarkets continues space reduction schemes as the focus turns on refurbishment and smaller store space.

Tesco has confirmed a 40% reduction in new space growth following the company’s first profit fall in 20 years for the half year.

The supermarket giant said it expects full year capital expenditure to be around £3.2bn, down from £3.8bn the previous year.

Tesco said its programme to reduce new UK space is on track, with a greater focus on smaller Express units.

"This is mainly due to our reduced new space programme in the UK, which will result in an overall reduction in UK capital expenditure, even though we are stepping up our investment in existing stores and online", a statement said.

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The firm’s £1bn recovery plan to stem market share loss has effected its profits.

Tesco said it was focusing now on improving existing stores and building its presence online; including its "grocery click & collect drive-through."

Chief executive Phil Clarke said: "We have made some important strategic changes which have fundamentally altered our approach to capital allocation. First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores - and second, investing in online to enable Tesco to take a leadership role in the digital revolution: playing our part in shaping the future of retailing."

Tesco reported a 1.6% rise in group sales to £36bn in the half year to 25 August 2012, with profit before tax down 11.6% to £1.7bn.

(IT/GK)