Briton's love affair with Ikea could be the latest victim of the credit crunch after the chief executive of the Swedish furniture giant said the slowdown in the housing market was affecting sales across the business.

Anders Dahlvig, who has overseen the group's dramatic growth in the UK over the past decade, said Ikea was suffering from a lower like-for-like sales growth - with negative sales in at least two major markets - as customers cut back.

Mr Dahlvig said: "The housing downturn is important for our business and we feel it quite a lot.

"We see it not only in markets such as the US or UK... but we see it in Spain, we see it in Italy, we see it in Germany. Of course this will probably spill over to other European markets as well; I can see that in the coming months."

Mr Dahlvig insisted that Ikea would not be slowing down its expansion programme but added that higher raw material costs were already eating into profit margins as the group keeps prices steady in a bid to boost business.

The Ikea chief made his comments at the World Retail Congress in Barcelona where Jose Luis Duran, chief executive of Carrefour, the French supermarket giant, warned that retailers had "never before faced so many challenges" given the turmoil on financial markets and inflationary pressure.

Jon Asgeir (cor) Johannesson, the founder and executive chairman of Baugur, the Icelandic investor, added that bank lending for major deals had all but dried up in the current climate. He predicted more mergers between retailers as private equity interest in the sector fades away, adding: "It's going to be a very interesting year."

Ikea has expanded rapidly since opening its first store in the UK in 1987 and achieved annual sales of £1 billion for the first time in 2004. The UK is now Ikea's fourth biggest market, with 17 of its infamous big blue-box stores in this country accounting for nearly 10 per cent of the group's euros 19.8 billion of sales in the year to August 31 2007.

However the furniture sector has been one of the hardest hit by the spending slowdown and the dramatic slide in consumer confidence. John Lewis earlier this year suffered its worst weekly sales of home furnishings for four years. Halifax, Britain's biggest mortgage lender, said on Tuesday that house prices had fallen by the biggest amount since the property crash of the early 1990s.

Mr Dahlvig insisted that Ikea would still be outperforming its rivals given its focus on price and its strong customer base.

He added that while there were "big challenges" in the Western world, there were opportunities at the same time in emerging markets. Much of Ikea's investment in the coming years is expected to be in countries such as Croatia, Slovenia and the Ukraine.

He said: “In bad times the competition is hurting as well and I feel it is an opportunity for Ikea. What we’ll see going forward is more expansion in emerging markets.”

Ikea plans to open 20 stores this year and next. Mr Dahlvig said that plans to open more stores in the UK were being frustrated by the UK Government's "anti-competitive" planning regime. Ikea has already started to open smaller city stores, in Coventry and Southampton.

Mr Johannesson reiterated Baugur's plans to grow despite the economic climate, both through acquisitions and more than doubling the sales generated by its brands over the internet. The Icelandic investment group raised £430 million on Tuesday by selling its media, technology and financial investments to two new companies, both partly funded by Mr Johannesson.

He added that Baugur had been approached about selling its stake in Moss Bros, the menswear retailer, despite its plans for a £40 million bid. There is growing speculation that another bid will emerge before Baugur completes its due diligence in a fortnight's time.

Mr Johannesson said: "People have called to ask about our stake but we are looking to buy the business."

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