Retailers hope for a last-minute Christmas rush this weekend

Ernst & Young says pre-Christmas discount levels have so far averaged 36% off the full-selling price, in contrast to 35% in 2006 and 2005.

The accountancy firm blames the credit crisis, falling house prices and high living costs for consumer gloom.

Other data has shown UK retail sales to be at 12-month lows in December.

Earlier this week, the Confederation of British Industry said the number of retailers that recorded positive year-on-year growth for the first two weeks of the month, minus those that said growth was down, produced the weakest figure since November 2006.

Wide-ranging and deep discounts are being offered to try and perk up the festive trade.

More profit warnings?

Early findings from Ernst & Young's annual Christmas pricing survey, which was conducted from 12 November to 17 December, showed markdowns range from as low as 10% to as much as "80% off" in some instances.

We are likely to see an increase in retailer profit warnings and even further casualties on the high street Jason Gordon, retail analyst, Ernst & Young

"This serves to highlight the huge gap between winners and losers - winners being able to avoid huge markdowns with a well defined initial price, promotion and clearance strategy," said Jason Gordon, a retail analyst at the company.

Trading this Christmas has been most difficult for footwear and clothing retailers, which have been offering discounts of up to 60%.

Fashion chains French Connection, Morgan and shoe retailer Faith all slashed prices on many items last week, while Marks and Spencer is offering big discounts on a wide range of champagne and sparkling wine.

Entertainment, where prices are directly comparable and where specialists are subject to intense competition from online players and supermarkets, have also suffered as have big ticket items such as electricals, which are highly exposed to a downturn in discretionary spending.

Largest sector markdowns Footwear Entertainment Clothing Electricals Source: Ernst & Young

Retailers on the UK high street will be looking forward to this weekend, hoping for a burst of activity to make up for a slow month.

However, Mr Gordon said that deeper discounting to clear poor-selling items could damage profit margins further.

Overall, he expects strong growth from online and good results from grocery stores to prop up the sector over the Christmas shopping period, with clear winners and losers.

But he added: "The early part of next year is set to be even tougher for retail, as cautious consumers rein in their spending even further.