Tesco’s recovery plans received a setback today as the supermarket chain reported a fresh dip in quarterly sales.

Tesco, which makes about two thirds of its revenue in Britain, is 20 months into a turnaround plan for its main UK business that has pumped over £1 billion into store revamps, more staff, new product ranges and pricing initiatives. Despite this, sales at British stores open over a year, excluding fuel and VAT sales tax, fell 1.5 per cent in the 13 weeks to November 23rd.

The company said that third quarter sales in Ireland fell by 8.1 per cent.

“In Ireland, our performance continues to reflect extremely challenging conditions for consumers, compounded by a more intense competitive environment,” the company said.

Tesco, which controls about 26 per cent of the Irish groceries market, has been losing ground to Dunnes Stores, Aldi and Lidl.

The group is also facing challenging conditions in its international markets, with underlying sales sharply lower in Thailand, South Korea.

Today's figures show that underlying sales were 5.1 per cent lower in Asia and 4 per cent down in Europe.

"Continuing pressures on UK household finances have made the grocery market more challenging for everyone since the summer and our third quarter performance reflects this," Chief Executive Philip Clarke said. "Overseas, the near-term trading environment also remains tough."

Total group sales increased 0.6 per cent at actual exchange rates, excluding petrol. “Despite the challenging conditions in many of our markets, we are performing in line with market expectations for the full year,” Tesco said.

Tesco, in common with Britain's three other major grocers - Wal-Mart's Asda, J Sainsbury and Wm Morrison - is being squeezed by hard discounters Aldi and Lidl and upmarket grocers Waitrose and Marks & Spencer.

Last month Kantar Worldpanel, the market research group, reported that all of the "big four" were losing market share for the first time in over a decade, while Aldi's share was at a record high.