Shops fear the worst Christmas for 22 years

Retailers are braced for their worst Christmas in modern times as a survey showed the high street suffered its worst month in 22 years in November.

The CBI, the UK's largest employers' group, said that sales were "heavily down" on a year ago and warned it did not bode well for the economy.

The figures, which accompanied separate reports showing that people were still shunning the high street, came as Gordon Brown put the finishing touches to the economic forecasts to be published in next week's pre-Budget report.

The CBI said more than half of all retailers reported that sales had fallen compared with November last year, outnumbering the 17 per cent who said that they had risen.

The negative balance of 35 per cent saying that sales had fallen was the largest since it began the survey in 1983.

The organisation said it was more worried about the outlook for Christmas as more than a third - 38 per cent - expected a worse December than last year, with just 15 per cent expecting sales to rise.

"Any hopes retailers had of an early Christmas present have been dashed," said John Longworth, an executive director of Asda, who heads the CBI survey panel. "Consumers have been extremely reluctant to spend money, and shops will be crossing their fingers that the predicted cold spell and the rapid approach of Christmas drives people through their doors and gets the tills ringing."

Although it was the fourth month in a row that the survey balance had hit a 22-year low, a CBI spokeswoman said it was "very worrying". "Retailers are locked in a game of chicken as to whether consumers will give way - or simply hold out for more bargains," she said.

The downbeat mood was echoed in two surveys of visitor numbers to major retail centres, which showed that a slight recovery in November had still left the high street looking emptier than a year ago.

FootFall said there were 3.4 per cent fewer shoppers last month than a year ago, despite a monthly rise of 7 per cent. Its rival analysts SPSL recorded a 4.3 per cent monthly rise to leave the annual figure 1.6 per cent down.

The Chancellor is expected to cut his forecast of overall economic growth of between 3.0 and 3.5 per cent this year - a very optimistic range - in the pre-Budget report. He has indicated that growth will be between 2.0 and 2.5 per cent, but independent analysts are forecasting growth as low as 1.6 per cent.

David Willetts, the shadow Trade and Industry Secretary, said: "This is bad news for the high street and is important evidence that Gordon Brown needs to take into account when he makes his statement next week." Last month Mervyn King, the governor of the Bank of England, blamed the rising tax burden for the fall in consumer spending, saying that the ratio of tax to incomes had risen two percentage points. "It's not surprising that, with that slowing, households spent less," he said.

Many analysts in the City say the Bank will cut interest rates in the new year if shoppers continue to keep a tight hold on their purses and wallets.

Howard Archer, UK economist at Global Insight, said: "Consumer spending is expected to remain under pressure from higher debt levels, increased utility and council tax bills... and concern that taxes will eventually rise further."

Thermal underwear sales warm chain store John Lewis

Not all the signs emanating from the high street are negative. John Lewis, the department store group, is on a roll, reporting its sixth week of rising sales. Warm clothing was in high demand, helping sales in the week to 26 November to rise by 7.6 per cent. Thermal underwear leapt into vogue with sales of men's thermals soaring by 427 per cent, a record. Women's thermals were up by 128 per cent.

Unlike the run-up to Christmas last year, many retailers have held fire on early sales, suggesting they are not sitting on as much excess stock as in 2004.

This time last year, Marks & Spencer had already held two "20 per cent off" days. The cold snap is also helping retailers to shift piles of jumpers and coats, which last year they were forced to sell off cheap before the traditional January sales.

Susie Mesure