The chief executive of DSG International said yesterday that fears of widespread job cuts had created a crisis of confidence among consumers as he reported a heavy fall in sales at PC World and Currys.

John Browett, who joined nine months ago, said that demand had “switched off” and there was little sign of a revival until 2010. Like-for-like sales across the group fell 7 per cent in the 16 weeks to August 23, while margins were 0.75 per cent lower.

DSG expects to make a loss of more than £10 million in the first half of its financial year, compared with a £52.4million pre-tax profit in the same period last year.

Mr Browett said that demand for white goods, such as refrigerators, had slumped by almost a quarter over the summer amid the gloom about the housing market.

“Clearly, the economic backdrop is challenging. What I'm seeing is a lack of confidence, a crisis of confidence, really, and, more than energy bills,

I think it's down to fears about increases in unemployment,” he said. “It's very difficult to predict how Christmas will be, but I expect it will be very tough.

“We are planning very cautiously. I've been very cautious on the economy for a while. I didn't think we'd see a recovery until 2010 and I still don't.”

Shares rallied 4p to 57p, an increase of more than 8 per cent, after news that DSG expects to generate a further £25 million of cost savings from its recovery programme, partly through hiring fewer staff in the run-up to Christmas.

However, analysts said that they were likely to cut full-year profit forecasts for the group in the coming days.

Phil Dorgan, retail analyst at Panmure Gordon, said: “The business review at DSG has got off to a good start in terms of cost-savings delivery, but we think the hard yards in terms of successful format change and turning round sales lies ahead.”

Electrical retailers such as DSG have been among those on the high street hit hardest by the fallout from the credit crunch as fierce competition from supermarkets and lower demand hit profit margins.

Mr Browett, a former Tesco executive, was forced to issue a profit warning within days of taking over in December last year.

He introduced a programme to “transform the DNA” of the business in May, basing his plans on improving stores and customer service, improving its website and cutting costs.

Mr Browett insisted yesterday that DSG was making headway towards achieving these goals. The group's biggest Currys outlet, a megastore near Birmingham, would open in the coming weeks offering 200 satellite-navigation systems and 250 televisions. “You will not need to go anywhere else to buy electricals,” Mr Browett said.

Yesterday's trading statement revealed that like-for-like sales at Currys had fallen by 7 per cent in the 16 weeks to August 23, the first quarter of DSG's financial year. Sales at PC World tumbled 12 per cent below the same period a year ago, when the chain cut prices to sell off laptops. DSG added that, despite signs of progress in Italy, sales in Southern Europe had fallen by 12 per cent.

John Collins, the DSG chairman, separately announced yesterday that he would be stepping down in a year's time in the latest departure from the group's boardroom.

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