TESCO revealed its weakest UK sales performance since the last recession yesterday after a supermarket price war halved growth in the last quarter.

Britain’s biggest grocer posted a two per cent increase in UK like-for-like sales, excluding petrol, in the 13 weeks to November 22, down from four per cent the previous quarter.

But Tesco said the sales growth decline came as it cut prices to lure in cash-strapped shoppers, resulting in higher sales volumes and customer numbers.

About 300,000 more customers were tempted into its stores each week by falling prices, according to the group.

It estimated the price reductions knocked between two and three percentage points off its quarterly sales growth.

Sir Terry Leahy, chief executive of Tesco, said: “We’ve squeezed the inflation out of our business and we’ve switched it for volume.

“We are getting more customers, they are buying more volume from us and I believe it is a sustainable level of growth.”

The recent launch of Tesco’s cut-price ranges was driving prices down at a faster pace than the wider easing in food inflation, added the group. It also said it had found another £90m to cut from its cost base in the UK alone this year, on top of the £450m savings already earmarked.