Sir Philip Green fears that the worst of the credit crunch has yet to hit the high street, offering the latest sign that retailers may not feel its full effects until next year.

The billionaire, speaking at a Topshop fashion show in New York yesterday, said he believed that the “very tough” market conditions could get worse as consumers face mounting mortgage bills, energy costs and food price inflation.

He told The Times: “People have started to realise this is going to a be long slog. We still haven’t seen a major profit warning.”

The comments came as Citigroup slashed its rating for the retail sector and said that consumer spending would be weaker in 2009 than 2008, in a note that hit shares in some of the biggest high street chains. DSG International fell 13 per cent, Next by nearly 7 per cent and Home Retail Group, the home of Argos and Homebase, dropped by more than 2 per cent.

ScS Upholstery, the struggling furniture chain, tumbled 46 per cent after a credit insurer refused to cover suppliers worried about not being paid by the business.

Sir Philip, who gave a warning of the pressures facing the retail sector last autumn, said that Topshop and Topman were continuing to trade well but that the middle market, where his Bhs chain competes with Marks & Spencer, was “very, very tough”. He said: “It’s going to find a level, but there is a lot of pressure.”

Sir Philip, whose retail chains are all privately owned, said that despite the turmoil there were no plans to put the brakes on Topshop’s expansion in the United States, which begins with the opening of a 40,000 sq ft store on Broadway in New York in October. “At the end of the day, are people going to stop shopping for clothes? No they are not,” he said. “It’s about being great and giving people a reason to shop. Keep it new, fresh, it’s all the things we are good at.”

It is thought that Sir Philip is targeting between $30 million (£15 million) and $40 million from the first year in sales on Broadway, compared with the figure of about £150 million that his flagship Topshop store on Oxford Street in London is expected to generate this year.

He said that he would be looking at other potential Topshop sites in New York, including Fifth Avenue. The second Topshop is expected to open early next spring.

Sir Philip said: “We are showing people our collection. It is the best we have had since I have been in the business and we have had a very, very positive response. We have heightened expectations; now we have to deliver.”

Most of Britain’s biggest retailers are looking overseas to help to offset the tough trading conditions in the UK. Marks & Spencer is looking at expansion in China and India, both countries also earmarked by Sir Philip.

Few of Britain’s retailers have been successful in America. Tesco launched Fresh & Easy in California last autumn and while it insists that the chain has surpassed all expectations, critics claim that some stores have missed sales targets.

Ted Baker, the fashion retailer, opened its first store in New York five years ago and now runs nine across the US. Ray Kelvin, Ted Baker’s chief executive, said that department stores, in particular, were finding market conditions tough in the US but that Topshop had the ingredients to succeed.

Mr Kelvin said: “America is particular, it is not easy, it is low yield per sq ft and there are some areas where there is no business at all. You have to have a particular position, you have to have something different, something unique and maybe with an English accent. It could well work out there. I hope it does.”

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