Retailers did increase sales over Christmas - but only just

Like-for-like sales across the sector - which exclude new store openings - increased by just 0.3% last month from a year earlier, the trade body said.

While overall sales advanced 2.5%, the BRC - which wants to see more interest rate cuts - said it remained the worst December on the High Street since 2004.

And other data suggested shoppers were waiting for the January sales.

Footfall, the retail research body said that shoppers had "tactically held back" from the High Street during the run-in to Christmas, preferring to seek out bargains and discounts in January.

Their figures showed that the number of shopping visitors for the first week in January were up 0.7% on the same period last year.

"Although the figures may initially suggest positive news for retailers, they may actually be losing potential profits because they have had to introduce sales and discounts in order to attract shoppers," said Martin Davies, of Footfall's owner Experian.

Energy bills

Meanwhile the BRC said its figures pointed "to a very challenging first-half of 2008".

And it warned that if the base rate was not trimmed, like-for-like sales could actually fall in 2008 for the first time in three years.

This study sets the scene for the new year ahead and like-for-like sales look set to move into negative territory as they did in 2005 KPMG head of retail Helen Dickinson

The Bank of England last cut interest rates in December to 5.5% from 5.75%, amid signs economic growth is slowing against a backdrop of higher energy bills, weakness in the housing market, and the credit squeeze.

Despite this reduction, BRC director general Kevin Hawkins said an additional half-point reduction to 5% was "preferable" for households, retailers and manufacturers.

The Bank of England's Monetary Policy Committee meets this week, with its latest interest rate decisionn scheduled to be announced at lunchtime on Thursday.

'Promotion-driven'

The BRC survey, conducted with accountancy group KPMG, found that while sales of food and drink grew in December, those of clothing and footwear fell for a third consecutive month.

And in another key Christmas retail sector, electrical goods, the survey found a mixed picture for sellers, with sales growth "often promotion-driven".

"This study sets the scene for the new year ahead and like-for-like sales look set to move into negative territory as they did in 2005," said KPMG's head of retail, Helen Dickinson.

And another analyst said that UK retailers "should count themselves lucky" having managed to achieve 0.3% sakes growth.

"These are tough times and heaven help the sector when the January sales are finally over," said Howard Wheeldon, senior strategist at BGC Partners.

"The five week period covering Christmas could and probably should have been even worse if consumers had battened down the hatches and responded to the current realities of economic events."

Retailers' updates

The findings come as the UK's largest retailers are continuing to report mixed Christmas trading figures.

While Currys and PC World owner DSG International and Land of Leather have been forced to issue profit warnings after weak festive sales, department stores House of Fraser and John Lewis have both reported a bumper Christmas.

Clothing retailer Next also said it had a tough December, while supermarket Waitrose managed to increase its overall sales by a 28.5%.