Prices for consumer goods will be cut by up to 50 per cent when the sales start tomorrow.
Disappointing sales hit retailers' shares last week. House of Fraser, Marks & Spencer and Kingfisher, owner of Woolworths, Comet and Superdrug, were all down.
Knickerbox can usually count on a surge in December spending to lift its annual sales, as its lingerie range bails out men desperate to find their partners a gift. But not this year. The specialist boutique's owners last week put the company into administration, the victim of a slowdown in spending. The collapse of Knickerbox follows a series of downbeat trading statements. Jewellery retailer Time Products, fashion retailers Oasis Stores and Mulberry Group all warned of slow sales in the run-up to Christmas.
Meanwhile, John Lewis, Britain's largest department store, said it failed to meet its sales target for the fourth week running.
Retailers are hoping that when they count up the takings they will find many people delayed their gift shopping until the last minute. For many, though, the increase has been less than spectacular, leaving sales well below anticipated levels.
"We saw good sales last weekend, but nothing as buoyant as we anticipated three or four months ago,'' said a spokeswoman for Comet, the second largest electrical goods retailer. "We didn't see the great pre-Christmas spending burst we had hoped for.''
Retailers had bet that rising real incomes, surging asset prices and windfall gains from building society flotations would continue to boost Christmas spending after sales growth earlier in the year rose to rates not seen since the late 1980s economic boom. But five quarter-point rises in interest rates since May sent mortgage payments higher. Halifax says monthly payments on a pounds 50,000 repayment mortgage have risen by 12 per cent since January.
"It's clear that the five interest rate rises have made consumers more cautious," said Ann Grain, a spokeswoman for the British Retail Consortium. "November was very weak and December started slowly."
Still, analysts said Christmas had not been a complete disaster for retailers. "It's not going to be a bonanza but neither is it going to be a doom- and-gloom scenario."said Richard Hyman, chairman of retailer analysts Verdict Research.