Supermarkets cut prices in war with the budget chains

Budget chain Aldi has posted a record 20 per cent rise in sales in the past month. Frozen-food outlet Iceland has registered a 15 per cent increase with Lidl also seeing a rise in trade as customers start switching away from the leading retailers.

Tesco has announced it will cut the price of 3,000 items by up to half from Monday while Asda is to sell 10 staple items - including bread, eggs and butter - for only 50p from today to lure customers back.

Andy Clarke, Asda's retail director, said: "It's going to be a tough year and the retailers that drive value hardest will win with customers."

Asda's promotion, which will run until Sunday, sees reductions on whitebloomer loaves, (down from £1.09), seedless green grapes (down from £1.68) and eight-packs of own brand sausages (normally 97p).

The 10 items will cost a total of £5 during the promotion instead of the usual price of £10.83. Britain's largest retailer, Tesco, has already cut more than £400 million from prices this year with more shelf space given to its cheaper own-brand goods instead of more expensive premium brands.

A Tesco spokeswoman said: "As our customers face tougher times we are doing everything we can to help them make ends meet."

Rocketing fuel prices are the main cause of higher prices for basic foodstuffs from wheat to rice. Official figures place food inflation at close to nine per cent with a typical family facing a £1,000 rise in its annual grocery bill, according to price comparison website mysupermarket.co.uk

A full-blown price-cutting campaign could now be in the offing as thirdplaced Sainsbury's already has a "Feed Your Family for a Fiver" campaign fronted by Jamie Oliver. Morrisons has cut the price of 2,000 items this month.

Aldi and Lidl have been the biggest beneficiaries of rising food prices with Aldi claiming to be at least 20 per cent cheaper than leading supermarkets.

Paul Foley, Aldi's UK managing director, said: "For those who need a store with piped music, a choice of 42 yoghurts and who can't pack their own shopping bag, then perhaps Aldi's not for them.

"But for those who want a guaranteed quality at low prices then the current economic climate simply makes Aldi an even more obvious choice."