MFI has escaped administration after pulling off a management buyout.

Gary Favell, MFI's chief executive, has agreed to take on the business from its owners Merchant Equity Partners, saving the jobs of more than 3,100 employees.

The private equity firm paid an undisclosed amount of money for the management to take the furniture retailer off its hands, the FT reported.

Favell said 'sales in recent weeks have been ahead of plan', although the company had budgeted for a significant decline in like-for-like sales. He said his team had 'the capital to provide continuity and security for our customers.'

Kroll had been lined up to act as administrator for MFI if attempts to find a suitable buyer had proven unsuccessful. Landlords were warned last week that they were unlikely to receive payment today when rent is due.