LONDON - Britons still want to celebrate Christmas this year but a worsening cost of living crunch means they will be doing it in a more affordable manner, the boss of Tesco, Britain's biggest retailer, said on Wednesday.

Chief Executive Ken Murphy said all the supermarket group's research had indicated that customers were determined to enjoy Christmas despite wages failing to keep pace with inflation that was 9.9% in August.

"We think it's going to be a Christmas that people are going to want to celebrate, but clearly they're going to want to celebrate it in an affordable way," he told reporters after Tesco reported first half results.

"For that we think there will be more dining-in and there'll be more celebrations in the home," he said.

That trend, which would be bad news for Britain's beleaguered hospitality sector, was already evident in growth in sales of Tesco's premium 'Finest' food range over the last six months.

Murphy said consumers were also looking to smooth out expenditure in the run-up to Christmas to better manage budgets, which is why Tesco brought forward its toys sale.

Murphy also reckons consumers will cut spending on gifts to focus on essential celebrations.

"We believe that maybe the gifts this year will be smaller and to a tighter group within the family and friends unit and we're adapting our proposition to suit those trends," he said.

(Reporting by James Davey, Editing by Paul Sandle)