Sir Stuart Rose's seemingly unstoppable progress towards £1 billion profits at Marks and Spencer has received a major setback after the UK's largest clothing retailer revealed the first fall in like-for-like sales for more than two years.

Sir Stuart, a retailer with 35 years in the business, said that his poorest customers were facing a squeeze and he called for a cut in interest rates to help ease the cost of borrowing for cash-strapped consumers.

“The consumer is facing a squeeze and we have been making sure that our customers continue to get a good deal, but everybody is under pressure, not just us,” he said.

Shares in M&S plunged almost 20 per cent in early trading 94p to 409p as the company reported poor Christmas trading figures.

As Marks shares dragged down the entire retail sector, Sir Stuart, who previously appeared to have the magic retail touch, vowed to stick around to see the group through the next 18 months.

However, he cast doubt on whether staff would receive any annual bonus in 2008 saying that trading on the high street would remain tough well into Spring 2009.

Headline sales climbed 2.8 per cent for the quarter to December 29, however like-for-like sales - perceived as a more accurate measure of a retailer's performance - slid by 2.2 per cent.

General merchandise was the worst performer in the critical Christamas trading period, down 3.2 per cent, but even food sales, usually Marks & Spencer's star performer, fell 1.5 per cent. Clothing sales, counted as part of general merchandise, declined by 1.2 per cent.

"The market has slowed down fairly appreciably. The crunch began in the summer, with the Northern Rock problems. People started getting worried about the money they had," Sir Stuart said.

He added that the slowdown was regionalised with Scotland showing a very dramatic deterioration, which he believed was not isloated to Marks and Spencer.

The group gave warning that it expected trading conditions to remain tough througout 2008 and into the Spring of 2009. However, Sir Stuart added that the company would stick to its stated strategy, continuing to refurbish its stores, open internationally in markets like China and India and offer excellent value for its customers at every price point.

Sir Stuart, who celebrates four years with Marks in May, insisted that he would not "run away" from the store as the high street took a turn for the worse. "I'm not one to shirk responsibility. I said I would stay for five years and I will do that," he said.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax