Retailers called for government assistance yesterday amid warnings that shops across the country were facing their most difficult period for decades.

The retail sector, which employs three million people, urged the Government to recognise that they were as important to the economy as the ailing manufacturing industry.

The British Retail Consortium, said that ministers should freeze the business tax rate, which is scheduled to increase by 5 per cent in April. Richard Dodds, of the organisation, said that there was no case for the increase, announced in the Pre-Budget Report, as it was based on the retail price index from September.

“Obviously, things have changed a lot since then, and retailers are suffering. This September's RPI rate of 5 per cent is unrepresentative and fell to 4.2 per cent in October - the biggest fall since 2003, so it should not be used as the basis for the April 2009 increase,” Mr Dodds said.

“It ought to be frozen this year. At the very least, there should be a more reasonable figure that is closer linked with where inflation is likely to go.”

Extra tax and regulation would put stress on an industry already under extreme pressure, he said.

The industry was looking not for handouts but for a recognition that it was important. “What we want is for the Government to acknowledge how tough it is for retailers. There's a lot of talk about the significance of the manufacturing sector, but not much concern about the retail industry, although it has as many jobs.”

The retail sector has been stuck in one of its toughest Christmas periods in years as the impact of tighter credit and the economic downturn is felt among consumers.

While enormous crowds turned out for the Boxing Day sales, profit margins were significantly reduced by the hefty discounting.

Retailers said that the spending splurge could not possibly make up for the lack of activity on the high street in previous weeks.

The consortium said that stores were suffering enormous pressure due to heavy discounting and promotions, which began well before Christmas.

The recession has already accounted for several casualties in the sector. As well as Woolworths, victims have included the furniture chain MFI and the music and games chain Zavvi, which collapsed into administration on Christmas Eve.

It is understood that the management of Zavvi approached HMV two weeks ago to take it on for a significantly reduced price but was refused.

Whittard of Chelsea and The Officers Club also called in the administrators but were immediately sold in rescue deals. Customers who buy goods from a shop that has since gone into administration have no guarantees when it comes to faulty goods. At its Boxing Day sales, Zavvi warned that there was no refund policy. However, customers may be able to send faulty goods back to the manufacturers.

Jason Gordon, retail director at Ernst and Young, said that while it was heartening that so many people were out shopping, their large numbers were unlikely to make much difference to the industry. “Its obviously good to see so many people out, but there is extreme discounting of merchandise so the impact on the bottom line is something altogether very different,” he said.

“Just because footfall is very high, doesn't mean that conversion rate and transaction levels are. There are very difficult times ahead.”

Despite retail woes in the high street, the online sector has seen some sales growth. Retail experts estimated that more than five million people would log on to the sales yesterday. IMRG, the internet retail group, said that e-shoppers were likely to spend £103.6 million, up from the £84 million spent last year.

Amazon said that it was planning for growth. Brian McBridge, the UK managing director, said: “We are not recession-proof but as a recession bites people will still be looking for value and people see the internet as the easiest place to check prices.”

Amazon reported “hundreds of thousands” of people going online to shop during Christmas Day.

While in Britain the re-opening of the shops after Christmas Day brought a bonanza for high streets, the atmosphere was starkly different in the US, where retailers saw little return from their last-minute price cuts.

There, sales up to Christmas Eve were down on last year, with MasterCard's SpendingPulse unit showing total retail sales, excluding cars, to have fallen 8 per cent in December compared with last year.

In Britain, claims by retailers of worsening conditions were backed up by a survey from the market researcher Experian which showed shopper numbers on Christmas Eve to have fallen 4.3 per cent compared with the same day last year.

Experian said that the discounts in the lead-up to Christmas had created an extraordinary “buyers' market”. However, this had still not been sufficient to offset consumer concerns about spending.

Industry figures say that things will deteroriate further in 2009. According to a new survey, 86 per cent of Britons say that they plan to make cutbacks and live more cheaply next year. Luxuries are top of the list for cutbacks with 45 per cent of people saying that they will spend less on travel, and 46 per cent planning to spend less on eating out, according to the ICM poll, carried out for The Guardian.

The retail sector received a boost, however, when John Lewis said it had seen improved sales in the final four days before Christmas. Its department store sales rose by 2.5 percent between December 21 and December 24. The store benefited from strong sales of items such as iPods, fragrance and lingerie.

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