Shares in UK retailers have slumped after Marks & Spencer revealed poor Christmas sales, causing fears of a wider economic contraction.
UK retailers were seen to have their worst Christmas in three years, says the BRC
M&S saw its worst quarterly results in more than two years, sending shares 18.7% lower by the close. Sainsbury's fell 5% and Next shed 5%.
Separate figures showed consumer confidence fell for the third straight month in December, said Nationwide.
Consumers have cut spending to counter higher energy and mortgage costs.
"We are seeing another sell-off today, triggered by ... the slowdown in the economy, Marks & Spencer results," said David Buik of Cantor Index.
The survey from mortgage provider Nationwide showed consumer confidence reached its lowest level in 10 months.
On Tuesday figures from the British Retail Consortium (BRC) said retailers saw their worst Christmas in three years.
The results from M&S come after other firms have seen poor Christmas sales including PC World Owner DSG International, while Land of Leather issued a profit warning.
Last week clothing firm Next said it did not expect store sales to grow in 2008, adding that it was "extremely cautious" regarding its outlook for 2008.
Already on Tuesday Sainsbury's saw its shares fall 8% spurred by worries that its Christmas trading sales figures - to be issued this week - would be poor.
The figures suggest the consumer spending boom, which has helped keep the UK afloat, may be coming to an end.
Interest rate decision
The gloomy news from the High Street will increase pressure on the Bank of England to cut interest rates when it meets on Thursday.
The Bank cut rates by 0.25% in December, and Bank governor Mervyn King has said he will take action to ensure the UK does not fall into recession.
But the Bank is also concerned about growing inflationary pressures fuelled by higher energy costs, which might translate into pressure for higher pay rises.
"Given the way things are going, why should the Bank of England's Monetary Policy Committee wait?," said Mike Lenhoff, chief strategist with Brewin Dolphin, adding that it takes a long time for interest rate changes to have an impact.
But despite signs of a slowdown, some retailers remained upbeat.
"There's no doubt consumers were feeling the pinch in the run up to Christmas," said Asda chief executive Andy Bond.
But he added: "We served a million more customers in the week before Christmas compared with the previous year."
This made it the firm's best Christmas to date, and trading in the New Year had started well, he added.