The Bank of England will come under intense pressure to cut interest rates this week as figures out today show that the high street suffered its worst Christmas for three years.

The British Retail Consortium will report that like-for-like sales across the sector rose by only 0.3 per cent in December, almost three times lower than the bleakest City forecasts.

Clothing, furniture and DIY chains all suffered from the spending slow-down that continues to fuel fears of possible store closures and job losses in the coming months.

Kevin Hawkins, director-general of the BRC, said it was vital that the Bank of England cut interest rates by half a point – to 5 per cent – this Thursday and take them down to 4.5 per cent by the summer.

Mr Hawkins said: “There are few glimmers of light out there. The sooner the Bank starts cutting rates, the sooner it will feed through to consumers and ensure a softer landing.”

Mark Price, managing director of Waitrose, yesterday said that a rate cut would boost sentiment across the high street. He said: “I think we are all agreed that 2008 looks like being a much tougher year for retail and there’s no doubt that the consumer has less to spend.”

The BRC’s monthly sales figures for December show that supermarkets were one of the few sectors to boost sales in the run-up to Christmas. Sales of large electrical goods, DVD players, footwear and women’s wear were all softer.

Helen Dickinson, head of retail at KPMG, said she feared that consumer spending may grow by just 1 per cent this year, the lowest rate since 1992.

Retailers endured another difficult day on the Stock Exchange amid mounting fears over the possible fall-out from one of the toughest trading spells in recent memory.

More than £250 million was wiped from J Sainsbury’s market value after The Times revealed that it had missed internal sales and profit targets in December. Shares in the supermarket chain fell 14½p to 391p, the lowest since September 2006. The fall is a further blow to Robert Tchenguiz, the property tycoon, who bought a 10 per cent stake in the summer.

Kingfisher, owner of the B&Q DIY chain, slipped 5 per cent, Next dropped 4.6 per cent and Marks & Spencer fell nearly 4 per cent ahead of its Christmas update tommorrow.

The gloom surrounding the economy may deepen if, as expected, Halifax reports today that house prices fell again in December.

The Bank of England’s Monetary Policy Committee begins its two-day interest rate meeting tomorrow. It cut interest rates to 5.5 per cent in December, the first reduction for two years.

However, many economists believe that fears over inflation, fuelled by record petrol prices and rising gas bills, may force the MPC to wait until February or March before taking the next move down.

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