Debenhams has warned of a sharp fall in profit after big discounts failed to spur a surge in last-minute Christmas shopping, sending a shiver through weaker British retailers.

In an ominous sign for rival Marks & Spencer (M&S), Britain's second-largest department store group said it would now miss analysts' first-half profit forecasts and would have to cut prices even further to clear stock.

A sea of red sale signs across the country's high streets in December illustrated retailers' battle for cost-conscious customers in a tentative economic recovery and as more people shop online.

Their efforts were hampered by storms which battered Britain and kept many shoppers at home on some of the biggest trading days of the year.

M&S made the rare move of slashing 30 per cent off all clothing in the run up to Christmas prompting fears it too had suffered in the critical trading period.

Debenhams has long used promotions to drive sales, offering 50pc reductions in the run up to Christmas on some items. But the company said it had to offer particularly deep discounts this year to keep up with competitors.-Reuters