The firm revealed this morning that it had reviewed its existing estate and now planned to cut its building programme to just eight new supermarkets over the next three years.

The retailer said it would also build four replacement stores, three of which would be mixed-use developments to unlock property profits.

Capital spending will be cut to between £500m and £550m over three-years, almost half of its previous spending target.

Up to £150m of capital investment savings will be ploughed into funding price cuts.

The decision deals a blow to contractors like Barr, Bowmer & Kirkland, ISG, Longcross and R G Carter, which have delivered much of the store building programme in recent years.

In a statement this morning Sainsbury’s said: “One consequence of the review of our estate will be a reduction in the amount of new supermarket space we open in the coming three years.

“We will open a total of 500,000 sq ft of space in each of the next two years, followed by 350,000 sq ft in 2017/18.”

“Over half of this new space will be convenience stores as we continue to target opening around 100 convenience stores per year.

Sainsbury’s said it had taken a charge of £287m for sites that would no longer be developed, and another £341m writedown in relation to unprofitable and marginally profitable trading stores.

It reported a half-year loss before tax of £290m and said that like-for-like sales had fallen 2.1% during the period.