Forget crystal balls - anyone listening to Lord Harris of Peckham at the start of last year should have known that the economy was heading towards a recession.

Just over 18 months ago, the founder, chairman and chief executive of Carpetright used his weekly chat show slot on the group’s instore Right Radio to tell employees that a storm was brewing.

“I told people to be careful. I said: ‘We are in for a rough time.’ I don’t think that anyone believed me, but it had all the wrong feeling, you know?

“Everyone was spending like they didn’t care and house prices were going up like there was no tomorrow. They were going up so much that people were having to pay more on their mortgages, they had less money to spend elsewhere, so you knew it was going to happen.”

Lord Harris has an advantage in reading the market. He has seen it all before in a career spanning six decades. Since taking over two carpet shops and a market stall in South London at the age of 15 when his father died, he has built not one but two successful publicly listed companies.

Harris Queensway was a 1,700-store conglomerate when he sold after a hostile takeover bid in 1988. Three months later, he opened his first Carpetright store. Now the company has more than 500 stores in the UK, dozens more in the Netherlands, Belgium and Poland and generates more than £500 million of sales a year.

Only days after turning 66, Lord Harris is preparing for the final chapter. His son Martin, the group’s commercial director, is taking on more responsibility and the two admit that the balance of power between them is pretty much “50-50”. It was Martin Harris who was the driving force behind an industry-wide “Fun on the Floor” advertising campaign that began this month and he is also trying to give Carpetright more of an upmarket air, through promotions such as one that began this weekend on top-of-the-range wool carpets.

At the same time, Carpetright has moved into a state-of-the-art £25 million warehouse in Rainham, Essex, which Lord Harris believes will prove to be the cornerstone of the company’s growth for the next quarter of a century. The laser technology in use at the 550,000 sq ft site allows Carpetright to cut 2,500 carpets or vinyls a day. Only 40 more workers, an extra shift, would need to be recruited for Carpetright to double the volume, producing enough floor covering to take 60 per cent of the British market.

It as, as Lord Harris is proud to point out, quite a change from his early days in Peckham - “I used to cut the carpets on the floor with my hands”. Walking round the facility, he beams at the ways in which the machinery works and the savings that the business is generating.

Carpetright has the room to make all its own cardboard inner tubes for the carpets it sends out - a saving of £150,000 a year. All the plastic and waste cardboard comes back to the warehouse from the stores and is sold off directly for recycling - generating an extra £200,000.

“And we get the carpets to the customer in 48 hours,” Lord Harris said. “Even if you look at the way trade is today and ask: ‘Is this a good investment?’ - I would say yes. It’s a money-making machine when you are busy. Obviously, in this market making money is very difficult.”

The potential offered by the warehouse and Carpetright’s expansion into mainland Europe - Lord Harris believes that he could open up to 100 stores in Poland alone - has caught the eye of a number of high-profile investors. The Times revealed in May that Cascade, the group charged with investing Bill Gates’s fortune, had taken a stake in Carpetright. Warren Buffett, whose Berkshire Hathaway vehicle owns Shaws Industries, one of the world’s biggest carpet manufacturers, is another shareholder.

Such confidence from the world’s commercial big hitters makes up for Lord Harris’s failure to take Carpetright private last year to escape the “spotlight” of life as a quoted company. The £850 million bid fell apart in December as the credit crunch began to bite. He said: “We were never going to sulk. I was a bit down the day after, but we had Christmas, we came back in and said: ‘We are going to make this company as big as we can.’ ” Carpetright highlighted just how much the credit crunch was affecting consumers last month when it revealed that like-for-like sales in the three months to August were down 15.4 per cent in the UK and Ireland. Lord Harris concedes that the economic climate is the toughest that he has known since the Opec oil crisis of the early 1970s, when Harold Wilson was at No 10. Worryingly, he believes that the economic situation could get worse.

“No, I don’t think we have seen the worst yet,” he said. “People have not got any money, they are not changing house and there are going to be a lot of people losing their job? It’s not a case of are we going to be in a recession? We are in one already.” What buoys one of retail’s oldest chief executives is the belief that carpet stores will be among the first to emerge from the downturn on the high street.

“The press and the news is so poor that people are scared to spend at the minute. I think they are not going to book their holidays for next year, but after the winter and, knowing they are not going to move, they will look to improve their home.”

How is he so sure? Because that is the way it has always happened.

Making a stand

Lord Harris has threatened not to sign up for another new shop in Britain unless landlords offer concessions to retailers in the ongoing row over rent payments.

The Carpetright founder and Sir Philip Green, the Topshop chief, are leading a group of nearly 30 retailers urging landlords to allow them to switch from quarterly to monthly rents to aid cashflow.

Lord Harris said that he would not open a new outlet in this country unless offered monthly terms for the site. He said: “In Europe, we pay monthly rents -– why do you pay three months in advance? Myself, Philip Green and a few other retailers got together and said: ‘We have to talk about this.’ It’s not just about rent, but service charges the length of leases. They offer monthly rents to companies in trouble, and that gives them an unfair advantage.”

The British Retail Consortium met the British Property Federation a fortnight ago to try to reach a compromise. The federation insisted that its members consider monthly rents when negotiating with retailers about new sites.

The group is due to meet landlords in the coming weeks.

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