Recession looms as further pain hits UK and Europe

The CBI today said retail sales fell for a sixth month in a row this September although there was a slight improvement on the devastation felt in August.

It came as business confidence crashed in the eurozone's three largest economies — Germany, France and Italy — leaving the region on the brink of recession.

Economists said the weak CBI survey highlighted the slump in the British economy while Royal Bank of Scotland analysts published a note on Europe titled "Full-blown recession looming in 2009 in the euro area".

The CBI found 21% of retailers enjoyed rising sales this month while 48% said they were down.

The balance of minus 27% was the third-weakest in the survey's 25-year history but better than the record low of minus 46% last month.

Shoppers worried about their jobs, falling house prices and rising bills stayed away from the High Street.

Worst-hit were sectors linked to the ailing housing market such as furniture stores and household goods suppliers, while supermarkets benefiting from food price inflation looked to be weathering the storm.

CBI deputy director general John Cridland said: "Sadly, there has been no Indian summer after the sales washout of August, and the retail outlook for early autumn remains bleak."

John Lewis, Argos, Next and Laura Ashley have been among the major stores reporting tumbling sales, and retailers are braced for a shocking Christmas.

Paul Dales of Capital Economics said: "Conditions on the High Street remain very weak. They are going to get worse before they get better."

Allan Monks of JPMorgan Chase was more upbeat, saying that although the survey was "still very weak", the improvement on August "offers some hope that the slide in spending through the summer has found a bottom".

Business confidence sank in Germany, France and Italy as the global financial crisis claimed the scalp of Lehman and left other institutions reeling.