Primark said yesterday that it was cashing in on the credit crunch and taking customers from mid-market rivals such as Marks & Spencer as shoppers look for bargains.

The discount fashion chain reported sales growth of 4 per cent on a like-for-like basis for the three months to September, a marked improvement from flat sales in the previous quarter.

The figures came as the British Retail Consortium revealed that the high street as a whole was continuing to suffer from the consumer slowdown and the dismal summer weather.

It said that like-for-like sales across the sector in August were 1 per cent below a year ago, the fifth fall in the past six months.

John Bason, finance director of Associated British Foods, which owns Primark, said that while it was clear that economic conditions were getting tougher, Primark was performing well.

“Across the high street it's difficult, but Primark is trading well against that environment, trading is very brisk,” he said. “We are continuing to win customers from the mid-market.”

Mr Bason said that a new distribution centre would open in Northamptonshire in the coming weeks, increasing Primark's capacity by about 30per cent in the UK. “We're putting our money where our mouth is,” he said.

The chain operates 181 stores across the UK, the Republic of Ireland and Spain. It is targeting as many as 40 stores in Spain and plans to open its first shop in the Netherlands, in Rotterdam, before Christmas.

The BRC said that clothing, furniture and floor coverings stores were among those hit hardest in August.

Sales of food and drink also rose at the weakest rate since March. Sales of computer games increased, as did footwear, boosted by demand for children's shoes as the school year started.

Stephen Robertson, the BRC director-general, urged the Government to cut regulatory costs to boost the retail sector. “Prospects for customers and retailers are inextricably linked. The Government must think again on business rate supplements and empty property rates relief and consider carefully where the minimum wage goes next year,” he said.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax