With British troops in the Gulf, many people were either glued to the television, protesting against war or just wary of spending money, causing the most significant fall in retail sales for over a decade, a report indicated.

The survey of retailers, published by the Confederation of British Industry (CBI), said that of 227 respondents only 28 percent said sales were up in March from the same month of the previous year, while 41 percent said they were down.

The difference between the two gives a balance of minus 13 percent, the first significant fall since January 1999 and the lowest balance since July

The survey was conducted between March 4 and 19, before the war actually began on March 20.

"Sales growth has stalled in almost every retail sector," said CBI chief economic adviser Ian McCafferty.

"These results confirm our fears that consumer confidence has been affected by uncertainties surrounding the war in Iraq, the impending tax rises and worries about the housing market," he added.

This month British consumers face increases in both national insurance, a direct payroll tax, and council tax, which is imposed by local authorities.

A separate report by the British Chartered Institute of Purchasing and Supply meanwhile showed that worries about the war helped to drive manufacturing activity last month down to the lowest level since December 2001.

The organisation's manufacturing index fell to 46.1 in March from a downward-revised 48.1 in the previous month. A reading below 50 signals contraction.

"This war has come at a very bad time for the manufacturing industry," said Roy Ayliffe, the institute's director of professional practice.

"New orders took a bad hit last month, with firms clearly very reluctant to commit to new business with the current instability of the geo-political situation," he added.

Economists said that although more clues were needed before a full picture develops of the damage being inflicted on the British economy by the war in Iraq, the surveys did not augur well.

"At the moment I think the Iraqi war is just leaving the recovery picture on hold," said Investec bank economist David Page.

"It depends how long this war lasts. The longer it lasts the more damage it is going to wreak on not just the UK but the global economy," he added.

The surveys will give Bank of England policymakers much to chew over when they meet next week for their monthly interest rate decision.

They will also make grim reading for Chancellor of the Exchequer Gordon Brown, who was already expected to cut his forecasts for economic growth and hike those for public borrowing when he delivers his annual budget on April 9.

SPACE.WIRE