Sales at John Lewis fell off a cliff last week as the financial-markets crisis put shoppers off spending cash.

The department stores chain today said sales in the week to 11 October tumbled 4.8% to £48.9 million as the carnage in the banking sector spread to the wider economy.

Meanwhile, on a more upbeat note, Sainsbury's chief executive Justin King welcomed the bank bailout and said confidence was returning.

However, this was not backed up by the John Lewis sales figures, which included a 3% slump at the newly refurbished Oxford Street store its worst performance for months while Peter Jones, usually a favourite among bonus-fuelled City workers, was down 14.9%.

A strong start to the week was undone as customers saw the emergency cut in interest rates and the bank bailout as a sign of how bad things really are, rather than as a cause for celebration.

Andy Street, managing director of the John Lewis department stores, said: "Last week started with great promise but as the financial world news worsened and the sun started to shine, so did our trade fall away."

Sainsbury's King said the Government's bailout of the banking system, including the nationalisation of Royal Bank of Scotland, Lloyds TSB and HBOS, was "a good idea".

He told Retail Week: "We're not out of the woods yet in terms of the impact [of the banking crisis] on the real economy, but we are starting to make sense of the changes we are facing."