Morrisons is slowing down its expansion plans as shoppers spend less and buy more cheaper items to help make ends meet during the recession.

The Bradford-based supermarket group has scaled back its plans to create more selling space to help save £200 million over the next two years.

Last year Morrisons announced its aim to open 2.5 million of new store space over three years. This has been revised down to 900,000 sq ft – with a focus on expanding in London and the South East remaining a top priority.

The cutbacks were announced as part of the UK's fourth biggest grocery chain's battle to revitalise its business after underlying sales fell 0.9 per cent in the six months to July 29, triggering a £9 million drop in profits to £440m.

Chief executive Dalton Philips forecast no let-up in challenging trading conditions, with more shoppers trading down to cheaper products or own label products, which were gaining market share across 63 per cent of Morrisons' lines.

He said: "Although the sustained pressure on consumer spending was reflected in our like-for-like sales performance, we have made further good progress against our strategic objectives – the building blocks which are the foundations of the future success of our business.

"By the end of the year our new Fresh Formats will be in more than 100 stores and we are now ready to launch our convenience stores in London supported by our new distribution centre.

“We have also extended our food production capabilities and will launch wine as our first online category. We expect to make further progress in the second half of the year."