Marks & Spencer shrugged off fears about a high street slowdown today as it unveiled aggressive plans for a "step-change" of the business by spending £2 billion on expansion over the next two years at home and abroad.

Stuart Rose, the chief executive, said that although there was economic uncertainty, M&S was better positioned than most of the competition to weather any slump over the Christmas period.

He reflected the confidence by revealing a 32 per cent increase in the half-year dividend and announcing plans to start a £1 billion share buyback programme.

He said: “We are confident in the business, the short-term outlook is uncertain but I cannot control the world. What we can control is the way we run our business.

“There is definitely chatter about the credit crunch, and the fact is that people are talking about it, what effect it will have we don’t know.

“If we have a slowdown in the important third quarter, so be it. The game we play is how do we compete with our competitors and we will suffer no more than anybody else.”

Half-year results revealed today that like-for-like growth had slowed to 1.2 per cent in the second quarter to the end of September, against 2 per cent in the first.

However, pre-tax profits jumped 11.5 per cent to £451.8 million, and Mr Rose said that M&S had gained market share in food and held steady in clothing.

Total revenue across the business was £4.18 billion, up 6.5 per cent, and the interim dividend was put up by 32 per cent to 8.3p a share.

The shares rose nearly 4 per cent, or 24.5p to 656.5p, making M&S the biggest climber in the FTSE 100.

Analysts said that the results beat consensus and that M&S was on track to exceed £1 billion of pre-tax profit over the full year for the first time since 1997.

Andrew Wade, a Seymour Pierce analyst, added: “With a consensus-beating profit result and the good news on the share buyback and dividend, these results should please the market.”

Mr Rose joined M&S three years ago to fight off a takeover bid from Sir Philip Green and indicated at the time that he would be staying for at least five years.

He refused to comment on how long he would remain at the helm but outlined plans to take his turnaround at M&S to the next level over the next two years.

Capital expenditure will rise to £1.1 billion a year and M&S will focus on overseas expansion for the first time since M&S pulled the plug on all but its international franchise activity in 2001.

M&S is targeting stores in China, India and Central and Eastern Europe and hopes to increase the overseas contribution to sales from its present 8 per cent to between 15 per cent and 20 per cent over the next five years.

It wants to have at least ten stores in India, and the first two in China likely will be located in Shanghai and Beijing.

Referring to China, Mr Rose said: “We don’t want to bet the ranch on it, but we will get in there, open two and three, see how it goes and decided from there.”

The rest of the increased investment will go on completing the retailer’s store modernisation programme, which is 70 per cent complete, and continuing to expand its internet business, M&S Direct.

Mr Rose said: 'We had a good first half despite a tough market impacted by unseasonable trading conditions, and at a time when many of our stores were undergoing major refurbishment.

'Whilst the short-term economic outlook remains uncertain, the actions we have taken to reposition and revitalise M&S over the last three years put us in a good position to continue to outperform and give us confidence in the long-term growth prospects of the business."

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