Major stores are mounting half-price sales in a desperate bid to shift their unsold stock before Christmas.

With takings falling short of forecasts, retailers are trying to lure bargain hunters with huge discounts.

Analysts blame the cost of living squeeze for knocking a predicted £3billion off festive spending this year.

And an Office for National Statistics study found that almost half of families are trying to make ends meet by splashing out less cash on presents and food.

House of Fraser, Flannels and Sports Direct are already offering reductions of at least 50 per cent. John Lewis is promoting half-price gifts and fashion and there are similar reductions at Argos, Boots and Debenhams. Their high street rivals are expected to follow suit quickly.

The PwC consultancy believes spending on presents and festivities will drop from £23billion to £20billion – an annual fall of 13 per cent. The expected outlay is £400 a head, which is £40 less than last year.

PwC spokesman Lisa Hooker said some chains will enter the run-up to Christmas with fuller warehouses than hoped.

'There could be deeper discounts as retailers clear seasonal stock,' she added. 'This will be particularly true in categories such as big-ticket, home, DIY, electricals, and toys, which consumers told us were less important to them this Christmas than in previous years.'

Paul Martin of accountants KPMG predicted more bargains: 'Price remains the main purchasing driver, so we are likely to see a prolonged and well-targeted period of discounting as retailers compete hard for a shrinking pool of spend and will need to clear stock.'

The authors of the ONS study said: 'Around three in ten adults reported being worried about being able to afford the things they planned to do this Christmas period. Around nine in ten adults reported they were going to meet up with friends and family during the Christmas period.

'Other plans included going to a place of worship or a carol concert (20 per cent), donating to a food bank (18 per cent), donating presents to a gift appeal (15 per cent) and volunteering their time with groups, clubs or organisations (8 per cent).'

According to the Bank of England, a typical household spends about £2,500 a month but this increases by £740 in December. Shoppers spend an average of 16 per cent more on food, 38 per cent more on alcohol and other drinks and 100 per cent more on books.

The British Retail Consortium said that traders were hoping for a last-minute dash to the shops.

A spokesman added: 'The cost of living crisis will naturally impact consumer spending decisions in the run-up to Christmas, as people will have to take steps to make their pounds stretch as far as possible without sacrificing their enjoyment of the festive season.

'Consumers may opt to 'trade down' in the products they buy – from cheaper brands, to frozen vegetables.

'But, given Christmas spending has had a slow start, we may well see a glut of spending – and therefore strong growth – in the final month of the year.'