Retailers have recorded nine consecutive months of falling sales as the pre-Christmas build up failed to give the sector much needed respite from the downturn.
According to the CBI Distributive Trades Survey, sales volumes over the critical first fortnight of December leading up to Christmas, were lower than last year for 67% of retailers.
The resulting balance of -55 per cent was worse than retailers had expected (a balance of -40 per cent) and is the weakest recorded since the survey began in 1983.
Andy Clarke, chairman of the CBI Distributive Trades Panel, and retail director of Asda, said: "The next week will be nail-bitingly tense for retailers as they pin their hopes on a last-minute Christmas dash.
We have already seen many stores bringing forward their sales and discounting goods deeply in order to entice customers into the shops. But with shoppers continuing to watch their pennies, it seems many are holding off doing their Christmas shopping in the hope of bagging a bargain."
"It is still too early to say whether the recent cuts in interest rates and VAT will help lift consumer spending. Retailers are bracing themselves for a particularly challenging festive season with little prospect of good cheer in 2009."
Weak consumer demand continued to have a knock-on effect on the volume of orders placed with suppliers over the period. A balance of 58% of retailers reported a year-on-year fall in orders, which was worse than expected. Stock levels increased slightly with a balance of 23% of firms holding more than enough stock to meet anticipated demand.