Lidl plans to invest £500 million (€563 million) ramping up its presence in London, opening 40 new stores over the next five years in a region where it has traditionally found it difficult to expand.

The German discount supermarket chain on Wednesday said the move – which will see it increase its foothold in the UK capital by almost half – would add 1,500 jobs and include a full size store on Tottenham Court Road in the city centre.

“It’s coming up to 25 years since we first launched in London, and in that time we’ve grown to almost 90 stores, employing more than 5,000 people. London is at the heart of our growth plans across Great Britain,” said Christian Hartnagel, chief executive of Lidl’s UK business.

Lidl and rival Aldi arrived in the UK in the 1990s and have expanded rapidly over the past decade, tripling their market share to around 15 per cent and muscling out traditional supermarkets. Lidl currently has 760 stores and 13 warehouses in the country.

But both discounters have found it more difficult to expand in London and the South East of England as they struggled to get good deals on rents.

Lidl’s UK subsidiary is German registered so it doesn’t file accounts at Companies House. But Aldi, which is UK-registered, does – and its last accounts show operating margins of around 2.5 per cent, indicating that heavy spending on new stores is squeezing profitability.

Both companies have previously pledged to open around 50 stores a year in the UK, in contrast to the traditional supermarkets whose “space race” ended a few years ago. As their existing stores mature, they are increasingly dependent on new branches for sales growth. – Copyright The Financial Times Limited 2019