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By Mark Potter LONDON, Nov 4 (Reuters) - Britons' confidence about economic recovery appears to be building, though companies remain wary and are still relying heavily on cost cutting to boost profits. Retailer Marks & Spencer reported flat first-half profits on Wednesday, towards the top end of expectations as tight management of costs and stock offset weak sales. "We have had a good start to the third quarter. However, the market remains competitive and, as we come up against volatile trading conditions last year, we remain cautious about the outlook for Christmas and the year ahead," said Stuart Rose, chairman of the 125-year-old clothing, food and homewares group. British consumer morale hit its highest level in the last two months since April 2008, the Nationwide Consumer Confidence Index showed. However, the survey was taken before data showed the economy contracted unexpectedly in the third quarter, making the current recession the longest ever. Low prices are still clearly vital for attracting shoppers. The British Retail Consortium said shop prices were flat in October compared with a year ago, with food prices up 2.5 percent and non-food prices down 1.3 percent, falling for an eleventh month in a row. Budget-focused pubs group JD Wetherspoon bucked its industry's trend for falling underlying sales with a 0.3 percent increase for the first quarter of its financial year, though this included a modest slowdown in recent weeks. NEXT RAISES GUIDANCE Marks & Spencer (M&S), which trades from over 650 stores in Britain and about 300 abroad, said profit before tax and one-off items was flat at 298.3 million pounds ($491.3 million) in the six months to Sept. 26. Sales rose 2.8 percent to 4.3 billion pounds, including a 0.9 percent fall at British stores open at least a year. M&S also said it planned to sell a selected range of around 400 branded grocery and household products, like Marmite and Kelloggs cereals, after a successful trial. Fashion and homewares group Next posted better than expected third-quarter sales and upgraded its sales and profit guidance for the balance of the year. The firm, which runs over 500 shops in the UK and Ireland as well as a home shopping business, said sales at stores open over a year fell 1.3 percent in the 14 weeks to Oct. 31. That compared with analysts' forecasts of fall of about 2 to 4 percent and a first-half decrease of 2.5 percent. ($1=.6071 Pound) (Additional reporting by James Davey and Matt Scuffham; editing by Simon Jessop) Keywords: BRITAIN CONSUMER/ (mark.r.potter@thomsonreuters.com; +44 20 7542-2943; Reuters Messaging: mark.potter.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.
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