Tesco chief executive Philip Clarke's pay was cut by 49 per cent after he declined a bonus amid slumping earnings at the British retailer.

The executive's total pay was #1.2 million in fiscal 2012, compared with #2.3 million a year earlier, the grocer said in the annual report posted on its website today.

Mr Clarke declined a bonus payment of approximately #372,000, the company said in a statement.

"I decided at the beginning of the year that I would decline my annual bonus for 2012," Mr Clarke said in the statement. "I wasn't satisfied with the performance in the UK and I won't take the bonus. I'm confident that we're tackling the right issues and building a better Tesco for customers, colleagues, shareholders."

Tesco in January said there will be "minimal" growth in earnings in the current fiscal year after its plan to cut prices failed to boost grocery volume sufficiently.

The shares have dropped 22 per cent this year. Mr Clarke's contract also says that termination payments in lieu of notice are limited to salary and benefits only, the company said.

That policy was in response to shareholders' reactions to the inclusion of bonuses in directors' termination agreements, Tesco said.

Bloomberg