Next, the high street fashion group, gave warning today that it did not expect to see a return to like for like growth in the whole of this year.

The company said it was "extremely cautious" on the year ahead as its customers would face increasing demands on their finances.

Shares in the retailer fell by almost 6 per cent from £16.66 to £15.71 as the market absorbed the news that the group was feeling the effects of a significant squeeze on consumer spending amongst the company's typical 25 to 40 year old customers.

The group said in a statement: "Many will experience year on year increases in mortgage charges for much of the coming year as a result of favourable fixed rate mortgage terms expiring."

The retailer's gloomy forecast got the post-Christmas trading statement season from the retail sector off to a downbeat start as it revealed flat sales in the six months from July 30 to December 24.

Next Retail and Next Directory sales were up just 0.3 per cent in the period, compared with last year. Sales from Next's high street stores actually fell 0.3 per cent and the group's performance was only redeemed by Next Directory's sales which rose by 2.2 per cent.

The company, which had warned in September that the high street was slowing down said that the figures were an improvement on its performance in spring and summer.

Shares in some high street clothing retailers like Next and Debenhams saw big losses in the run-up to Christmas on expectations shoppers would spend less on discretionary items in the face of higher mortgage rates and weaker housing markets.

Next said today that full year profits would be slightly ahead of market expectations, in the range of £492 million and £502 million. Operating profit will be up between 4 and 6 per cent.

Earnings per shares is expected to be up by between 14 and 17 per cent, due to share buybacks and a lower tax rate.

"This was despite a worsening consumer environment and significant markdown activity on the high street," Next said in a statement.

Next avoided the route that many retailers took of beginning sales in the weak before Christmas, which could have flattered sales figures considerably.

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