SHARES in Marks & Spencer fell sharply on boardroom plans to increase British staff numbers by 2,000 to 57,000 over the next 12 months following the creation of 1,500 new jobs last year. Analysts fear increases in staff costs will squeeze margins and restrain the rate of future profit growth following an 11.6 per cent increase in first half pre-tax profits to £431 million sterling on sales up 9.1 per cent at £3.53 billion.

The interim profit outcome was not affected by lost sales worth between £30 million and £40 million following the IRA attack on the group's flagship store in Manchester in June. The store was fully insured.

Chairman, Sir Richard Greenbury, dismissed analysts' margins concerns, which knocked 25p of the company's share price to 483p, saying increased staff numbers were needed to maintain quality services for customers during a period of increasing volume sales.

Although the group's interim profits were at the lower end of market expectations, Sir Richard said he was pleased with "a good half-year performance with sales growth across all areas of the business". "With increasing levels of consumer confidence now evident, I am confident that we can continue to meet the exciting challenges ahead," he said.

Operating profits of European stores, taking in outlets in Dublin and Cork, increased 42 per cent to £11 million on turnover up 10 per cent at £200 million, partly due to recovery from previous depressed levels due to terrorist activity in Paris. Figures for European operations are stated before increased pre-opening costs up £5 million at £6.8 million reflecting the cost of new store developments in Dublin, Cologne, Bordeaux and Paris.

Future expansion plans in Ireland are expected to involve sonic £65 million investment in seven new outlets over the next five years in addition to existing stores in Dublin and Cork and the new store due to open in Quarryvale, west Dublin, in 1998.

The interim dividend is up 10 per cent at 3.3p