For some retailers, it will be a brutal start to the year

The main problem is that many consumers are running out of credit after having first remortgaged their houses and then borrowed on credit cards, BDO said.

The company predicts that 1,751 retail firms will collapse this year.

The remaining businesses will then be in a stronger position, and the rate of failure will slow in 2005, BDO said.

Vital Christmas

"The tightening purse strings of the over-indebted will be the most important contributory factor to retailers' woes," the London-based consultant said in its report.

According to BDO, the majority of businesses close down during the first quarter.

It added that the Christmas shopping period will prove to be more important than ever this year after an exceptionally weak November.

Recent retail surveys suggest that consumers have become more savvy, with many putting off purchases until the start of sales, which have come earlier than usual this year.

Specialist retailers are also coming under increasing pressure from leading supermarkets, who are moving aggressively into non-food markets such as clothing and cosmetics.

"High street retailers are coming up against competition from all angles," said BDO's Nick Jenkins.