SWEDISH furniture giant IKEA is the latest retailer to feel the pinch in the UK – as battered consumer confidence and a sluggish housing market hit sales.

The privately-owned chain, which has a store at Birstall and 17 other outlets across the UK said like-for-like sales in the year to August 31 fell by 3% to £1.15bn as the consumer spending squeeze, driven by higher prices and lower wage growth, took hold.

But the company, which has 280 stores in 26 countries, said it was still able to increase its share of the home furnishings market in the UK from 6.1% to 6.3%.

It has also pledged to invest £26.6m over the next year in improving its store environment.

Martin Hansson, IKEA UK’s country manager, said: “Low consumer confidence, coupled with the stagnant housing market has resulted in another tough year for us.”

The company said strong kitchen sales – which were up by 6% on a like-for-like basis – helped support the overall performance as more customers took up the kitchens service package that was launched in 2010.

Elsewhere, IKEA said it reduced product prices by 5% across the home furnishings range compared to the previous year and added 800 more products for customers to buy online – where sales grew by more than 25%.

Ikea said a new delivery service, enabling the majority of customers to pay lower delivery costs, resulted in a 60% increase in uptake of the service.

Mr Hansson said: “Looking ahead, we are confident that our commitment to price, quality and improving our services will enable us to strengthen our market position over the coming year.”

IKEA will add a further 1,500 products to its website offering and plans to launch mobile phone sites and additional mobile applications.

The company, founded in Sweden in the 1940s, will celebrate 25 years in the UK in 2012.

IKEA’s results came a day after furniture brand MFI made a surprise return to the market as an online retailer.

MFI has been relaunched as a website selling furniture, beds and bathroom suites, but not fully fitted kitchens or bedrooms.

Owner Walker Capital believes that MFI can compete with retailers such as B&Q, IKEA and Homebase – despite the demise of other rivals such as Focus DIY and Habitat.