In stores across the country retailers are trying to shift stock with sales. Among those already offering discounts are fashion chains Laura Ashley and Wallis, and Argos on jewellery. Electrical stores are advertising large reductions on goods such as computers, while in the West End of London, Liberty has cut the price of designer clothes by a quarter, and the Escada and Louis Feraud boutiques have sales.
Harvey Nichols, whose flagship London store is performing under par, has ruled out a pre-Christmas sale, but has told shoppers to expect reductions of up to 50 per cent on 27 December.
With many stores making as much as 15 or 20 per cent of their annual profit around Christmas, a busy festive season is essential.
Yesterday, Clive Vaughan, research manager with retail specialists Verdict Research, said retailers were starting to panic. "The shops are sitting on millions of pounds-worth of Christmas stock and no one is buying. The retailers panic and start discounting. If, this weekend's sales are no better, I would predict there will be a whole rash of other sales starting."
Official Government figures due out on Wednesday are expected to tell a depressing story for retailers, similar to that of the latest figures from the British Retail Consortium (BRC) for November, which showed sales up by 1.1 per cent on the previous month - the slowest rate of growth since April 1996. "Interest rate rises have affected confidence more severely than expected," said the Consortium's economist Pamela Webber.
"People had windfall payments over the summer, and average wages have risen by 4.1 per cent this year, so they do have money, but they aren't spending it. It's possible that it's going on higher mortgage payments." Sales, she adds, have been dragging since late summer. "There has been a definite downturn since August. Some retailers have already got stock on sale, which is unprecedented in December except in times of recession."
Even if consumer spending does pick up in the immediate run-up to Christmas, many economists believe consumers will have less cash to spend in the new year. "There are a whole gamut of forces building up against the consumer," said Leo Doyle, an economist with Dresdner Kleinwort Benson.
Higher mortgage rates and tax hikes, such as the phasing-out of profit- related pay that will kick in in April, will all take their toll. The pounds 35bn windfall from building society conversions that boosted spending earlier this year has all but dried up.Reuse content