Tesco is facing a major shareholder damages claim over last year’s profit overstatement that plunged the retailer into crisis and led to a dramatic slump in the value of its shares.

Tesco Shareholder Claims Ltd. (TSC), a vehicle set up earlier this year by US litigation firm Scott + Scott to explore legal action against the retailer in the UK and Europe, said in a statement today that it is now being advised by the renowned barrister, Philip Marshall QC, and that, in light of the advice provided, it intends to pursue claims against Tesco “vigorously on behalf of affected shareholders”. He previously represented Liverpool FC to fight off a challenge to the club’s last change of ownership by Fenway Sports Group in 2010.

TSC also confirmed that it has already signed up various institutional investors to join the claim for compensation. It added that the case against Tesco was strong, and will involve a “substantial claim”.

Today's announcement follows the launch of the shareholder action group in March this year. Compensation is being sought from Tesco in connection with the company's disclosures in the autumn of last that it had materially overstated its profits for a multi-year period dating back to at least the fiscal year ended 23 February 2013. TSC said that intends to demonstrate that Tesco's repeated overstatements of profit caused substantial losses among its members.

Scott + Scott has brought a similar claim against Tesco in the US. TSC said it intends to instruct leading law firm McGuireWoods LLP to conduct the litigation in the UK with it issuing its formal claim later this year.

John Bradley, Chairman of the TSC, said: "With the benefit of the advice received from Philip Marshall QC we believe we have a strong case and we wish to pursue it vigorously."

David Scott, Managing Partner at Scott + Scott LLP added: "The advice we have received comes as no surprise. Our investigation over the last few months has shown that Tesco committed serious violations when it overstated its profits. We intend to pursue Tesco in order to help our clients recoup their losses."

Last year’s profit overstatement occurred because of inaccurate booking of revenue from suppliers. It has prompted a wave of inquiries and the matter is now being investigated by the Serious Fraud Office (SFO), the Financial Reporting Council and the Grocery Code Adjudicator.