Christmas 2007 was the worst for retailers since 2004, according to the latest report from the British Retail Consortium, conducted in association with accountancy group KMPG.
It found that retail sales only rose 0.3 per cent, in stark contrast to the rise of 2.5 per cent seen in 2006. The three-month trend rate of growth was also down to just 0.8 per cent, reflecting the state of month-by-month sales.
"This result is somewhat worse than we expected and points to a very challenging first half for 2008," said Kevin Hawkins, director general of the BRC.
"Given that the full effects of the Bank's previous increases in interest rates have yet to be felt by many households, retailers and manufacturers alike need a rate cut now – preferably a full half-point."
However, some analysts have warned that the recent drastic increases in utilities bills will make any rate cuts futile.
Consumer electronics retailers saw mixed results with PC World, Currys and Currys.Digital all seeing poor sales during the period, especially on computers and laptops. John Lewis in contrast saw its profit boosted by sales of electricals.