Fast Retailing, Uniqlo’s owner, said it was focusing on its five London stores in an attempt to make the UK business break even by next year.

It said that about 450 of its 636 UK employees were likely to lose their jobs.

Uniqlo said the UK operation would now be run from Japan with help from a small team in London.

It was unclear last night whether Bernie Foster, Uniqlo UK’s chief operating officer, would remain with the group.

Ms Foster, former managing director of Body Shop and Miss Selfridge, was appointed last November to turn the business around. She is Uniqlo UK’s third boss in two years.

Masatoshi Morita, chief executive of Uniqlo UK, said yesterday that Uniqlo was not pulling out of Britain.

He said: “Fast Retailing remains committed to the UK market and has identified potential growth opportunities for the future of Uniqlo.”

Japan’s leading clothing retailer originally planned to have 50 stores in Britain by next year.

But within months of opening its first store in London, Uniqlo began to experience difficulties in Japan. A multimillion-pound advertising campaign in Britain also failed to arouse interest in the stores.

In the seven months to May 2002, Uniqlo reported losses of £20 million in the UK on sales of just £14 million.

Steve Pomfret, Uniqlo’s first UK boss, left after just a few months. Two months ago, five senior directors were dismissed in parallel with a savings drive.

Analysts said that Uniqlo had failed to offer clothes that were sufficiently distinctive from rivals such as Gap, Zara, Hennes and Mauritz and the recently revitalised Marks & Spencer.

The analysts also said that Uniqlo had struggled to make its cheap clothing profitable because of the high rent and staffing costs in the UK.

David Harper, of the property agent Harper Dennis Hobbs, said: “The UK is one of the most expensive rental markets in the world and Uniqlo’s product didn’t have the design content or quality to help it compete within that.”

Nick Bubb, an analyst at Evolution Beeson Gregory, agreed: “Uniqlo succeeded in Japan because it was different and cheap; its product never really stood up here.”

Uniqlo is closing all its stores in the North West, the Midlands, Manchester, Liverpool and Coventry, as well as outlets in Basingstoke, Watford and Bromley. Property sources said the sites would go up for sale next week and there was high demand for its relatively large stores. They suggested that Hennes and Mauritz, the Swedish fashion chain, New Look, the low-price clothing retailer, and HMV, the music store, would be interested.