Tesco's sales are falling faster than any of its competitors, as it loses market share to discounters Aldi and Lidl, as well as to upmarket rival Waitrose.

The supermarket saw sales fall 3.6 percent in the 12 weeks to 12 October, according to research firm Kantar Worldpanel. The drop has reduced its market share to 28.8 percent, down from 30.1 percent a year ago.

The news came as HSBC analyst David McCarthy said Tesco needed to invest £3bn to turn around its UK performance.

McCarthy said Tesco needed to lower its food prices by 5 percent to 6 percent, increase store staff numbers and improve the quality of its products.

He said it could take six years for Tesco to address the issues, but that he believed it would succeed.

"Eventually, we think Tesco could emerge as the long-term winner amongst the quoted sector and should be able to take the fight to the discounters," he added.

Despite Tesco's sales drop over the past 12 weeks, Kantar said the period marked the supermarket group's best performance since June.

Kantar's data continued to show discount retailers Aldi and Lidl increasing their market share, with sales up 27.3 percent and 18.1 percent respectively.