Banking turmoil blow to high street

Like-for-like sales fell 1.5% and have been down in six out of the last seven months, the British Retail Consortium (BRC) said.

Retailers have already felt the squeeze this year as inflation and dearer mortgages hit shoppers' disposable incomes.

The current run of falling sales is the worst since 2005 and BRC director-general Stephen Robertson said: "The financial turmoil has further undermined consumer confidence."

Now the retail sector has a nervous eye on the impact of the current crisis on the looming festive season.

Helen Dickinson, head of retail at survey sponsor KPMG, said: "The key question now is not what has happened but what will be the impact of the current environment on sales over the crucial Christmas trading period - many will be holding their breath."

During September big-ticket furniture sales saw their biggest year-on-year fall for eight years as shoppers reined in spending. The rapidly-declining housing market and banking chaos meant even heavy discounting and price-cutting often failed to tempt more customers.

Food and drink was the only sector showing sales significantly up on a year ago, although the growth was the weakest since March and food price inflation accounted for the lion's share. Shoppers with tight budgets concentrated on discount ranges with organic products and exotic fruit giving way to mince and sausages, the BRC said.

Clothing sales also worsened despite price cuts and stock clearance of summer goods - with only children's clothing and footwear gaining a minor boost from back-to-school sales. Autumn clothing also gained a minor fillip from colder weather.

In the BRC's less volatile three-month measure, like-for-like sales also fell 1.1% between July and September.