Tesco, Britain's biggest food retailer, warned on Thursday its profit would likely fall this year as it set aside cash to deal with a step up in the "competitive intensity" of the market, sending its shares down over 6%.

Tesco has indicated a growing price war among UK supermarkets, with its chief executive, Ken Murphy, noting an "intensification" of competition and targeting up to £500 million in cost reductions.

Tesco has said it expects to make lower profits this year amid a growing price war amount the UK's major supermarkets. The UK's biggest grocer has forecast profits of between £2.7bn and £3bn compared with the £3.1bn it made for the financial year that has just ended.