Tesco will on Monday announce plans to create 20,000 jobs over the next two years as it attempts to turn around its struggling UK business.

The supermarket shocked investors in January by warning that UK profits could fall this year after it suffered its worst Christmas in decades, and last week brought more bad news for the company as it saw its market share fall to 29.7%, the lowest for almost seven years.

Its poor performance prompted Tesco boss Philip Clarke, who took over from Sir Terry Leahy last year, to say the store chain had to change tack. It has vowed to spend millions of pounds – as much as £300m according to some reports – on improving the quality of its fresh food, its choice of products and its customer service.

It has conducted trials in 200 stores to determine how to win back dissatisfied customers, and is employing more staff and improving training as a direct result of the feedback it received.

Richard Brasher, Tesco's UK chief executive, said: "We will invest in more staff on the sales floor at busy times, greater expertise and help in the crucial areas of fresh food and enhanced quality and service across our stores at all times."

As part of the new investment, Tesco will refurbish hundreds of its existing stores as well as opening new outlets, although it is expected to concentrate on smaller stores rather than hypermarkets.

Many of the new jobs will be aimed at young people who are unemployed, said Tesco. The company is already part of the government's controversial work experience scheme, which ran into criticism and was subsequently altered so young people would not lose their benefits if they left early.

Tesco has so far offered 1,500 work experience placements with a similar number to follow. After protests that the company was using benefit claimants as unpaid labour, Tesco said the second 1,500 would have the choice of staying in the scheme and keeping their benefits or being paid by Tesco, with a view to being offered a permanent job if all went well. Any jobs created in this fashion would be part of the 20,000 announced on Monday.

Tesco also plans to expand its apprenticeship programme to provide another 10,000 places, either for existing staff or new starters. Again, any new jobs will be part of the overall total.

David Cameron welcomed the announcement as "a massive confidence boost for the UK economy" from the country's biggest private sector employer.

At the moment more than a million 16- to 24-year-olds are unemployed and Brasher said major businesses had "a big responsibility to step forward, invest and create jobs".

Tesco's UK business has been the engine of growth which allowed it to expand overseas, but analysts are concerned about the implications of a slowdown in its home market.

Before the January update they had been expecting Tesco's profits to rise 10% this year, but now the performance is forecast to remain flat.

The company's £500m "Big Price Drop" at the end of last year was dubbed the "Big Price Flop" by the City, but this has not prevented the company from sticking with the scheme. A fourth wave of discounting has recently begun under the "New Price Drop" slogan.