Primark sales have crept higher ahead of its spin-off but its owner has been hit by a slump within its troubled sugar business.

The budget fashion chain saw sales rise 3 per cent to £2.9billion over the 16 weeks to 20 June, as UK consumers still flocked to shops to buy its clothes and accessories.

In the UK, sales were up 1 per cent but fell 0.1 per cent on a like for like basis.

But owner Associated British Foods warned its ailing sugar business was now bracing for an annual loss of up to £60million, compared with earlier guidance for a £25million loss.

It blamed the ‘duration and severity of the Middle East conflict’ for hiking gas prices, which are ‘significantly higher’ while sugar prices in Europe have not risen.

Shares in ABF plunged 4 per cent on Wednesday afternoon.

At Primark, ‘a strong start’ in March had been thrown off by ‘weaker trading’ in April and May which was caused by the fall out of the Middle East conflict dampening consumer confidence and ‘unseasonal weather.’

But better weather in June had ‘contributed to stronger trading’, the group said.

ABF chief executive George Weston said: ‘While the retail environment remained challenging in most markets, Primark continued to strengthen its customer proposition, including new product launches, a sharper focus on price and increased investment in marketing, particularly digital.’

It said shops in the US are performing well, including its first store in Manhattan, New York - the opening of which was attended by stars including Sex and the City star Sarah Jessica Parker in May.

And the conglomerate said it was on track with plans to separate the fashion chain from its food businesses by the end of 2027.

The firm has said the separation of Primark, which trades from 486 stores in 19 markets and generates more than half of ABF profits, will allow it to be valued higher as a stand-alone company than it would be as part of a group.

Should Primark list in London, it would also boost the beleaguered stock market as its size means it is set to sail straight into the FTSE-100.

In addition to Primark, ABF owns grocery brands such as Ovaltine, Ryvita and Twinings, as well as its sugar division.

Russ Mould, investment director at AJ Bell, said: ‘Associated British Foods’ conglomerate structure has helped to cushion the blow from a miserable showing from its agriculture arm and weaker sugar operations.

‘Normally the weak parts wouldn’t be something to worry about, but plans to spin off Primark means future setbacks in any one division could be more pronounced.’

Mould said that the company may also ‘be giving serious thought to exiting sugar’, given its existing plans to break-up the company.