John Lewis sent a shudder through the high street and sparked fresh fears over the health of the British economy yesterday by reporting its biggest sales decline for almost a year.

More than £1 billion was wiped from the valuations of some of the best-known retailers on the stock market as the employee-owned department store group, the star performer in the sector, said that it had endured “one of the toughest weeks in recent memory”.

John Lewis’s statement came as the AA reported that petrol prices had climbed to a record high, with unleaded petrol rising to 104.49p a litre, in a further squeeze on consumers’ wallets.

Motorists are now spending £500 million more a month to fill up their cars than a year ago and they face a further rise in petrol duty on April 1. Diesel is expected to hit the equivalent of £5 a gallon this weekend.

John Lewis said that sales across its department stores in the week to February 16 were 3.4 per cent below the same period a year ago – the biggest fall since April last year.

Its store at Bluewater, Kent, suffered a 17.2 per cent fall, with Brent Cross, North London, down 11 per cent.

Although the data is for only seven days, the week marks one of the first trading periods since the end of new-year price cuts that lured in shoppers across the high street in January.

George Buckley, the chief UK economist of Deutsche Bank, said: “I’m afraid that John Lewis’s figures are a sign of things to come. Debt repayments are going up, house prices are going down, taxes are at a 20-year high. It’s going to get significantly tougher for the consumer as the year goes on.”

Retailers’ shares on the stock market plunged, with Next down almost 5 per cent, Marks & Spencer falling 4.6 per cent, J Sainsbury down 4 per cent and DSG International, the owner of Currys and PC World, down 3.7 per cent.

Richard Hyman, managing director of Verdict Research, said: “If John Lewis is finding it difficult, then God help everyone else. Most other people don’t have the brand power, the brand strength or the service proposition they do. They’re at the top of the Premier League.

“It doesn’t take a rocket scientist to work out people just don’t have as much money in their pocket, and I fear there will be more casualties on the high street.”

Earlier, retail analysts in Landsbanski warned investors to expect a wave of profit downgrades in the coming months. In a note to clients the investment bank said: “We doubt that we have seen the worst of the current slowdown. We now have more perceptible signs of a housing market reversal, tighter consumer lending criteria and the possibility of a marked rise in unemployment.”

Dan Knowles, regional director of selling operations in John Lewis, said that school half-term holidays and the recent good weather explained some of the fall in sales, but admitted that customers were cutting back on “big-ticket” items such as sofas and beds.

Mr Knowles said: “The market is slowing, there is no doubt about that. But we believe we are continuing to outperform and see the current down-turn as an opportunirty to grow share.”

A number of mid-market chains have collapsed since the turn of the year, including Dolcis and Base. A restructuring expert said that the forthcoming end-of-March rent review could prove the next tipping point for vulnerable retailers.

The slowdown has also hit the catering sector, with Laurel, the pubs group, on the verge of putting some of its sites into administration.

— Retailers may be forced to run criminal checks on thousands of staff under a proposed extension of regulations designed to protect children from sex offenders. The Government is considering whether to extend the Safeguarding Vulnerable Groups Act to newsagents, pharmacists, dispensing opticians and first-aiders. Retailers fear that the move could cost big chains more than £400,000 every five years. One source said: “This is using a sledgehammer to crack a nut.”

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