British high street retailers endured their worst festive period for three years, as consumers reigned in spending in the wake of the global credit crunch.

Figures from the British Retail Consortium revealed overall sales rose 2.5% in December compared to last year but said companies on the high street suffered the leanest Christmas since 2004, with more money being spent online.

Like-for-like sales, which omit new operators, increased by just 0.3%, the BRC added. "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 Helen Dickinson, head of retail at KPMG, which co-produced the report.

The BRC has called for interest rates to be cut to 5% to help prevent the UK from sliding into recession.