Tesco and Asda are to cut the cost of thousands of everyday groceries in a move that threatens to start an all-out supermarket price war.

Tesco, the country’s biggest retailer, will reduce the price of 3,000 items by up to 50 per cent from Monday in an attempt to win back customers struggling to cope with record petrol prices and energy bills.

Asda has promised to sell ten staple items, including bread, eggs and butter, for only 50p from today as part of a campaign that it claims will win over thousands of shoppers from rivals.

Supermarkets are having to reduce prices despite soaring costs because cash-strapped families are cutting back on their weekly shopping to afford higher electricity and gas charges, motoring expenses and mortgages.

The credit crunch has triggered a radical change in the way that Middle England shops for food, with recent figures showing an unprecedented sales boom at budget supermarkets such as Aldi and Lidl.

Aldi, the German-owned discount chain, has experienced a 20 per cent rise in sales over the past four weeks - the fastest growth rate in Britain. The number of shoppers visiting its 400 stores has gone up by a quarter in the past three months. Iceland, the frozen-food supermarket chain, has registered a 15 per cent rise in sales. Marks & Spencer, meanwhile, has suffered a 3.2 per cent fall in takings in its food halls in the past month.

Andy Clarke, Asda’s retail director, said: “It’s going to be a tough year and the retailers that drive value the hardest will win with customers.”

Tesco has already cut more than £400 million from prices this year. Now it is going farther, placing more emphasis on its cheaper, own-label goods. Nearly one third of goods in the big four supermarkets are on special offer now, up from one fifth a year ago.

Tesco pockets nearly £1 in every £7 spent on Britain’s high streets and has more financial muscle than any of its competitors. One retail executive said the retailer had been “arming itself” in recent weeks by trying to wring more money from its suppliers, before a price battle at the checkout.

“The recent Competition Commission inquiry into the sector forced people like Tesco to pull its punches,” he said. “But they have been trying to get as much as they can from suppliers to build a reasonable war chest. With the Competition Commission inquiry out of the way, I think we can expect the heat to go up.”

A Tesco spokeswoman said: “As our customers face tougher times we are doing everything we can to help them make ends meet.”

Grocery bills have rocketed in the past year as higher commodity costs push up the price of wheat and rice. National Statistics believes that food price inflation is running at close to 9 per cent. The high cost of items such as pasta, eggs and cheese has been blamed for Britain’s inflation rate hitting its highest level for nearly 18 years.

MySupermarket.co.uk claims that a typical family faces a £1,000 rise in the amount it spends in supermarkets over the coming year.

Analysts believe that the recent series of price promotions have been little more than skirmishes because supermarkets have feared that a full-blown price-cutting campaign would harm their profits. Now they have no alternative if they want to get families through their doors.

Sainsbury’s started a “Feed Your Family for a Fiver” campaign in March, backed by the celebrity chef Jamie Oliver, while Morrisons cut the price of 2,000 items this month.

Asda has already started selling a 2p sausage - 16p for a packet of eight - and has slashed the price of mince from 96p to 50p. Its 50p promotion is being seen as an attempt to tackle discounters such as Aldi and Lidl head on.

Aldi, which claims to be at least 20 per cent cheaper than the four leading supermarkets, has been trying to poach more Asda shoppers by highlighting wine and olives. Paul Foley, its UK managing director, said: “For those who need a store with piped music, a choice of 42 yoghurts and who can’t pack their own shopping bag, then perhaps Aldi’s not for them. But for those who want a guaranteed quality at low prices, then the current economic climate simply makes Aldi an even more obvious choice.”

Asda’s promotion, which lasts from today until Sunday, includes fresh baked white-bloomer loaves (down from £1.09), 500g seedless green grapes (down from £1.68) and 454g packs of eight Asda own-brand sausages (usually priced at 97p). The ten items included in the deal will cost £5 instead of the normal price of £10.83.

The grocery sector has been one of the few areas of the high street left unscathed by the credit crunch. More than a dozen high street chains have been forced into administration, including Dolcis, the shoe store chain. Sales of furniture and home furnishings have collapsed, with John Lewis reporting a sales decline in all but three of its department stores over the past 20 weeks.

Retail experts are convinced that more high street stores will go to the wall, with predictions that 100,000 jobs could be lost between now and the end of 2009.

Tesco and Asda are both expected to be far more aggressive on price promotions for nonfood products later this year as Sainsbury’s increases its own offers of televisions and washing machines.

DSG International, the electricals retailer that owns Currys and PC World, said yesterday that it would be pressing ahead with plans to cut an estimated 1,000 jobs after a collapse in profits. John Browett, its chief executive, said: “The market is going to be very tough and challenging.”

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