Nearly half of all retailers believe new year sales will be harmed by the increase in VAT from tomorrow.

It comes after a survey by the British Retail Consortium revealed most retailers were more confident this year for December sales.

But they were concerned the VAT increase to 17.5 per cent would affect business.

Stephen Robertson, British Retail Consortium Director General, said: “There’s some good news here but we’re not out of trouble yet.

"I’m reassured that retailers are more confident about their prospects this Christmas but remember the comparison is with dramatic sales falls last year.

"There are more customers willing and able to spend now but, for many retailers, it’s taking even more discounts to persuade them to buy.

"The impact of the VAT increase is a concern for half the respondents but other clouds are gathering.

"Customers are cautious. Jobs are a big worry and neither will be helped by the tax-battering promised by the Chancellor.”