Fears over the fallout of the global credit crunch grew yesterday as Signet, the jewellery retailer, and Pendragon, Britain’s biggest car dealer, blamed growing economic uncertainty for stark profit warnings.

Shares in Pendragon plunged by nearly 35 per cent to 35½ as the group cut £12 million off forecasts for this year and £18 million from its profit projections for 2008.

Trevor Finn, the chief executive, said that price cuts on new cars had wiped 20 per cent from used car margins and he urged the Bank of England to cut interest rates to boost confidence.

"It's difficult to comprehend why interest rates haven’t come down so far,” he told The Times. “Mervyn King [the Bank of England Governor] seems to be running the economy based on what he sees in London’s West End, but that’s not a microcosm of the real world.”

Signet, which runs the Ernest Jones and H Samuel chains in Britain, also gave warning yesterday that a marked slowdown in trading on both sides of the Atlantic meant it was likely to miss expectations this year. Like-for-like sales in the United States since the beginning of the month have fallen 7 per cent below the levels seen a year ago, while sales in the UK have “weakened” in the past fortnight.

Terry Burman, the chief executive, said: “I am not going to make any predictions but things are obviously slowing in both markets.” Shares in Signet fell 17 per cent, or 13p, to a five-year low of 64p, wiping more than £220 million from the group’s market value. Quarterly results showed pre-tax profits across the business in the three months to November 3, traditionally the quietest quarter, tumbled by nearly 70 per cent to just $2.5 million (£1.2 million).

Analysts said that the two warnings would only add to concerns over consumer confidence, given fears of a housing slump and the effects of higher interest rates on an estimated million people coming off cheaper fixed-rate mortgage deals.

Separately, Topps Tiles, the high street tiles and flooring chain, yesterday reported that like-for-like sales growth had slowed to 1.1 per cent in recent weeks from an average 4.7 per cent in the year to last month. It said that trading had become more challenging: “We must not underestimate the potential impact that this year’s turmoil in financial markets will ultimately have on consumers.”

John Stevenson, an analyst at Shore Capital, said it was now clear that there would be a marked divergence between winners and losers on the high street over Christmas.

He added that a spate of price cuts and Christmas sales by Debenhams, WH Smith, Gap, Burtons and Dorothy Perkins reflected the fact that stores were already having to use incentives to attract customers. “No doubt Christmas will be late and, with the next weekend representing the ‘payday’ watershed, retailers will be looking for signs of improvement as we move into December,” Mr Stevenson said.

Signet generates about 70 per cent of its annual profits over the Christmas and new year period, with the majority coming from the United States, where it runs Kay Jewelers and Jared the Galleria of Jewelry.

Mr Burman insisted it was far too early to rule out a recovery over the coming weeks and added: “The market is uncertain. It looks like it’s slowing but it could go either way. It’s not a life or death situation, we will still make plenty of profit in the fourth quarter.”

However, analysts said it was now likely the group’s profits this year would be about $350 million, significantly below previous guidance of $390 million to $400 million.

Signet also said that it would be forced to pass on higher gold and diamond prices after Valentine’s Day. Gold prices have surged by $200 an ounce in recent weeks.

Pendragon’s profit warning was its fourth in the past year and second in the space of five months. The group, which has expanded aggressively with the acquisition of CD Bramall and Reg Vardy in the past two years, is now likely to report pre-tax profits of just £33 million for 2007. The City was forecasting £85 million a year ago.

Mr Finn said the pressure on margins meant that Pendragon was making about £300 on every car sale, against £380 last year. He added: “It may not sound like a lot, but we are selling 3,000 cars a year. There’s a lack of clarity on where interest rates are going and it is adding to the uncertainty. There needs to be clear direction from the Bank of England.”

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