Retailers still hope for late rush as shoppers stay home

Heavy discounting by retailers meant to stimulate activity at Britain's high street tills appeared to have had little effect last night, after figures showing a sharp drop in the number of shoppers prompted predictions that this year will be the quietest festive season for traders in nearly 40 years.

Price cuts of up to 90 per cent being offered by some retailers on an obvious make-or-break weekend for troubled chains failed to produce the hoped-for spending surge. "Footfall" figures for Saturday indicated that the number of people entering shops was down by 8.4 per cent compared to this time last year. Those statistics do not reveal whether shoppers' average spending was also down.

Analysts said the average decline in footfall of 11.4 per cent over the past week suggested many Britons had reached their spending limit and had already put away their wallets until the January sales. Anita Sharma Manan, a senior analyst at Experian FootFall, said: "There is no hiding the fact that this year will be one of the worst for retailers since the early 1970s. Deep discounting may have brought out some shoppers, but it has not been enough and the cost will be borne by the retailers. It is evident that many shoppers are now spent up, having planned on much tighter budgets this year. This has been a consumers' Christmas, but all at the expense of the retailers and at little advantage to the economy. For retailers, we anticipate the mother of all Christmas hangovers come January."

The new year is traditionally a vulnerable time for struggling traders because cash levels are at their highest and stock levels at their lowest, making it the best time for creditors to force liquidation.

Insolvency experts expect several leading chains to go bust at the start of January: on Christmas Day, retail landlords will demand three months' rent in advance. They are expected to send bailiffs into shops to seize goods off shelves in lieu of payment, rather than wait for banks to seize failing companies. Retailers also face having to meet VAT bills and restocking for the new year – all without the support of banks reluctant to lend.

In an attempt to stave off the worst case scenario, Britain's retailers are cutting prices at record levels. Research by the accountants PricewaterhouseCoopers found that 82 per cent of traders were discounting their merchandise this weekend, compared to only 52 per cent a month ago.

A study by the auditors Ernst & Young found the average pre-Christmas discount is 37 per cent, compared to 34 per cent last year. B&Q, the DIY chain, will unveil price cuts of up to 75 per cent on Christmas Eve, while Superdrug said it will discount goods by up to 90 per cent on Boxing Day.

The bleak analysis was tempered by managers of large shopping centres. Norman Black, a spokesman for Brent Cross shopping centre in north-west London, said: "The last couple of days have been excellent. We have a lot of smiling traders. But Christmas has come very late and we would still expect to be behind last year in terms of the amount of money we will take."