(Arcadia's) board believes that the UK economy faces a period of uncertainty which is likely to affect consumer spending adversely

Adam Broadbent, chairman, Arcadia

The company warned that the UK economy could be heading for a downturn which would hit consumer spending "adversely".

The comments came as Arcadia formally agreed to be bought by BHS owner and retail entrepreneur Philip Green.

A bid of �850m ($1.3bn) was accepted in principle by Arcadia last week, and the price includes about �80m worth of share options for senior management.

Arcadia said the 408 pence a share offer represented an "acceptable premium" to the company's shareholders.

Trouble ahead?

Arcadia also issued a profit forecast for the past financial year.

Arcadia businesses

Top Shop Top Man Miss Selfridge Burton Dorothy Perkins Wallis Evans

It said it expected to report pre-tax profits for the year to August of �106m, up from �63m last year.

It added that this figure would be boosted by about �5m because of an adjustment to the trading year.

But the company warned that its High Street chains could face a tricky time in the coming months.

"Arcadia operates in the fashion clothing sector which is typically more exposed to the effects of changes in consumer spending and economic circumstances than many other sectors," it said.

"In addition, Arcadia has higher operational gearing than many of its competitors which increases the sensitivity of the group's profitability to changes in sales.

"The board also believes that the UK economy faces a period of uncertainty which is likely to affect consumer spending adversely.

"Furthermore, Arcadia's trading performance over the last two years has benefited to some degree from a relatively benign competitive environment which is unlikely to continue."

New owner

Taveta - the company formed by Mr Green for the takeover of Arcadia - said that it had received promises to accept the offer from Icelandic retailer Baugur and from Arcadia directors for 20.5% of the shares.

It also said that Bank of Scotland would be a minority shareholder.

"I am looking forward to completing this acquisition as soon as possible and to working with all of the people at Arcadia to continue the successful development of the business," Mr Green said.