Mohamed Al Fayed has come up with a novel way of combating the credit crunch. The Harrods owner is looking to put a smile back on shoppers’ faces by signing up West End musicals, the English National Ballet and even the stars of the BBC’s Strictly Come Dancing to appear in his Knightsbridge store.

Cast members from Mamma Mia!, Chicago and Avenue Q are all lined up to perform 20-minute showcases in Harrods as part of “That’s Entertainment”, an eight-week marketing push that begins next month.

James McArthur, chief executive of the department store, told The Times: “It’s all doom and gloom out there. They say retail is theatre: this will be about being fun and entertaining.” Cheering up shoppers, it is hoped, will persuade people to spend more.

The move comes as Britain’s luxury retailers and brands continue to out-perform the rest of the high street. Despite the most severe slowdown in consumer spending for nearly two decades, sales at Harrods are up by more than 10 per cent on a year ago.

Boodles, the Bond Street jeweller, brought out a limited collection this year, including a £350,000 pair of matching bracelets, to satisfy demand from its upmarket clients.

Michael Wainwright, Boodles’ joint chief executive, said: “People are painting a bleak picture, but it’s nowhere near as bleak as people are saying. Let’s face it – a lot of people had made a lot of money in the last five to ten years.”

Ironically, at a time of concern about the impact of the abolition of the 10p income tax rate on average incomes, tax changes have helped Boodles.

Mr Wainwright said: “There has been another crop of millionaires following the changes to capital gains tax in April. People sold their businesses and made millions of pounds.”

In May Burberry reported annual sales of nearly £1 billion, helped by the success of its £11,000 Warrior hand-bag. Orders at Silver Cross, the upmarket pram-maker, are up by almost 40 per cent.

London’s West End has been protected from the worst of the retail slowdown by the influx of Russians and other tourists who spend an estimated £6 billion in the capital’s stores each year. However, industry experts believe that retailers such as Harrods are also benefiting from the growing number of shoppers who are reacting to the credit crunch by seeking out high-quality goods that will last longer, rather than opting for the cheapest available. Anda Rowland, who runs the Anderson & Sheppard Savile Row tailor, said: “When people have less money to spend, they take more time to decide how to spend it.”

Mr McArthur said that Harrods was benefiting from the strength of its brand, something that he said the That’s Entertainment campaign would help to reinforce. “I think it’s like any business: if your position is clear and your customers enjoy it, you’re going to do better than someone who has an unclear proposition and is only fighting on price.”

As well as West End musicals, customers at Harrods will be able to take part in screen tests, attend beauty workshops, watch a film and meet Tony Curtis and Eva Mendes, the actors.

Underlying profits at Harrods rose by 40 per cent to £85.2 million in the year to February 2007, the last set of accounts filed at Companies House.

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