House of Bruar, the luxury retailer which lures motorists off the A9 in the Highlands, has warned that the economic slowdown could hurt the sector, and that suppliers are feeling the pinch.

The business, however, has been in expansive mode, building its mail order business and taking headcount from 104 to 140 last year, adding some £400,000 to staff costs, according to the annual report just published. Pre-tax profit was constant at £2.8m, following a rise from £2.4m in 2005.

The directors of the Blair Atholl-based business said: "The general state of the economy is a concern for luxury retailing as it will lead to a contraction in the market."

They also noted: "The gross profit of the business could be affected by the weakening of sterling against the euro. The weakening is unlikely, however, to improve the competitiveness of domestic supply to a sufficient degree to ensure that they remain in business. The supply chain continues to be a major concern."

Total director pay at the company, which is controlled by Mark and Linda Birkbeck with son Patrick as managing director, rose from £103,228 to £112,815. There is no dividend. Shareholder funds rose £2m to £12.2m.