Marks & Spencer has long boasted of having a finger on the pulse of Middle England. Yesterday, as the retailer shocked the market with grim trading figures, its chairman offered a bleak prognosis for middle-class families.

“You can imagine conversations around the breakfast, dinner or lunch tables in 25 million households around Britain about, ‘Darling, what does this mean for us?’ ” Sir Stuart Rose, the M&S executive chairman, said. “The answer is, ‘Tougher times’.”

Shoppers were buckling under the strain of rising energy bills, higher mortgage payments and record petrol prices, M&S said, as it reported that sales of clothing and food across its high street stores had fallen by 5.3 per cent in the three months to the end of June - its worst performance for three years.

“It’s the fastest and most severe slowdown I’ve known since the early 1990s,” Sir Stuart said. “We are not in a recession yet, but that largely doesn’t matter as it’s all about what the consumer feels.”

Times Archive, 1964: Lord Marks and the retail revolution

To the man in the street he will be remembered as the real initiator of high quality, low cost clothes

• Marks & Spencer and Woman

Related Links

• M&S reveals poorest results since 2005

• M&S shares hit 8-year low after profit warning

• High street hit by full force of credit crunch

Sir Stuart said that the retailer would miss profit targets this year and hinted that it would have to cut prices to win back customers, who were switching to cheaper rivals such as Primark, Asda or the Aldi discount chain.

The gloom caused a £4 billion collapse in the value of retail stocks across the City as analysts worried by the warning slashed forecast profits for the coming year. Shares in M&S plunged by 25 per cent to an eight-year low, wiping £1.2 billion from the group’s market value.

The clothing retailer Next fell 8 per cent, while Kingfisher, the owner of B&Q, tumbled 5 per cent. J Sainsbury slid by 6 per cent on renewed fears of an all-out supermarket price war.

Phil Dorgan, an analyst at the investment bank Panmure Gordon, said: “We said that the M&S trading statement would be poor. We were wrong. It is absolutely dreadful.”

Industry experts said that there were real fears about how long the high street slowdown could last, given concerns that gas and electricity bills could rise again in the autumn.

Petrol prices are already at all-time highs, with diesel costing more than £6 a gallon, up by more than 30 per cent on a year ago. A dozen retailers have fallen into administration this year, including the shoe store Dolcis. Analysts said that it was only a matter of time before others collapsed.

Richard Hyman, strategic director at the accountancy firm Deloitte, said: “Anyone who thinks that all we need to do is take a quick breath and shut our eyes for things to get better is mistaken. It’s going to get a lot tougher.

“We live in a world of immediate reactions on financial markets, but consumer markets don’t behave like that – it takes a lot longer and there are still large numbers of people on fixed-rate mortgages who have yet to feel any pain.”

Sir Stuart said that there had been a notable drop in consumer confidence in the past three weeks. He added that the rising petrol price had already changed shopping behaviour, with people cutting the number of trips to out-of-town stores and with village shops enjoying a sales boom.

“It’s a bit like being on a motorway. You are going too fast and you suddenly realise someone has dabbed the brakes on,” he said. “There was a first dab on the brakes by consumers in November, a second one at the end of January, and this is another marked slowdown.”

He added: “What we are seeing is a correction. We have had ten years of boom time, everyone now has to swallow hard and cut their cloth according to their means.”

“Personally I think there is worse to come because there is going to be no relief in terms of interest rates; no relief in terms of short-term commodity prices and no relief in terms of utility costs.”

He urged the Government to be more caring and boost confidence either through cutting road tax or petrol duty. “The Government should be mindful about not letting confidence slip below a certain level,” he said.

M&S, famed for its advertising campaigns featuring celebrities such as Myleene Klass and Twiggy, said that food sales fell by 4.5 per cent in the three months to the end of June, while general merchandise sales, which includes clothing, were down by 6.2 per cent.

Sir Stuart said that M&S had lost market share in food and needed to be far more innovative, despite its reputation as the destination shop for high-quality groceries. M&S’s head of food, Steven Esom, is being replaced only a year after being paid £500,000 to join from Waitrose, which has since stolen M&S’s crown on quality. Mr Esom now looks like a scapegoat.

Sir Stuart said: “In order to meet these challenging market conditions, we need to increase the pace of change on a number of operating and trading initiatives.”

He conceded that almost 40 per cent of the problems affecting the M&S food business stemmed from mistakes made by the management, but he insisted that the group was in much better health than when he joined four years ago. “We are a strong business in a weak market.”

M&S has still not addressed the fact that, for many shoppers, it remains somewhere to go for a treat rather than a weekly shop. With Britain’s big supermarkets fighting tooth and nail to survive as customers “trade down”, M&S is being squeezed out.

Sir Stuart was hailed as M&S’s saviour when he returned to lead the business and to help to defend it from a £9 billion takeover bid by Sir Philip Green, the Topshop-to-BhS billionaire.

He was praised for attracting shoppers back to M&S by cutting prices as well as making M&S clothing more fashionable through ranges such as Per Una and Autograph.

Two months ago he reported full-year pretax profits of £1 billion, the first time for a decade that M&S had achieved that level. Analysts said yesterday that profits in 2008-09 could fall to as low as £720 million, and to £600 million in 2010.

Times Recommends

• Gazprom brands Ukraine 'a barbarian' in gas row
• Services sector raises fears over UK jobless
• Retailers surge as profits survive sales plunge