Central London-based retailers have experienced a slowdown in growth from the same time last year, with stores seeing sales 7.1 per cent higher, but down from the 9.8 per cent increase in December 2006.
Footfall in Central London also slowed, falling below its level at the end of 2006 and was generally weaker than the rest of the UK.
"While London's retailers bounced back at Christmas from November's worst performance for two years and significantly outperformed retailers in the rest of the UK, weaker growth than December 2006 shows they were also hit by the severe pressure on customers' personal finances," said the British Retail Consortium's director general, Kevin Hawkins.
"London retailers discounted early and deep to tempt hard-pressed customers in; great for bargain hunters but an indication of a very tough start to 2008 for those retailers being squeezed between rapidly rising costs and falling shop prices," added Hawkins.
Even those who maintained premium prices throughout the period, such as Apple, suffered with rising rents and rates squeezing profits, as reported by PC Retail last week.
Helen Dickinson, head of retail at research analysts KPMG added: "The like-for-like growth of 7.1 per cent for Central London was a continuation of the overall trend seen for the rest of 2007. The centre of the capital has shown itself capable of continuing to draw in consumers, as well as tourists, and increase like-for-like sales.
"This is at odds with what we have seen over the country as a whole, where, while like-for-like sales for the retail sector grew across the year, this was only marginal in December at 0.3 per cent."