WRAPUP 3-UK retailers ease Christmas fears, but gloom lingers

* Next, Debenhams, Christmas sales better than feared

* House prices, services sector, confidence data all grim

* M&S reported to be shedding jobs, Tesco cuts prices

* Debenhams shares leap a third, Next rises 10 percent

(Adds empty shops forecast, Woolworths closure)

By Mark Potter and James Davey

LONDON, Jan 6 (Reuters) - A string of British retailers eased fears of a collapse in consumer spending over Christmas but warned on Tuesday that rising unemployment and plunging house prices would blight trading for months to come.

The cautionary comments from companies including fashion chain Next and department stores group Debenhams were backed by economic surveys showing tumbling house prices, a weakening services sector and sliding consumer morale.

The data and retail pessimism kept pressure on the Bank of England to deliver another big cut in interest rates from the current two percent when it announces its decision on Thursday.

Economists are forecasting a cut to 1.5 percent, taking rates to their lowest level since the Bank was set up in 1694.

Britain has slashed interest rates by 300 basis points since October and cut taxes in a bid to ward off a deep recession. But a stream of gloomy economic news and retail business failures suggests worse is still to come.

The Nationwide Building Society reported a record 15.9 percent annual drop in house prices and sliding consumer confidence in December.

Another survey showed the services sector -- which accounts for three-quarters of the British economy -- contracting at a near-record pace and shrinking for the eighth month in a row..

There were "few meaningful signs of any turnaround," said RBS economist Ross Walker.

JOBS GO

The Times newspaper said landmark British store group Marks & Spencer would announce over 1,000 job losses on Wednesday, while Tesco, Britain's biggest retailer, kept up the pressure on the industry by announcing 3,000 price cuts.

Unemployment is climbing as Britain suffers the fall-out from the credit crisis and the deflation of a property bubble.

Debenhams Chief Executive Rob Templeman said lower interest rates, taxes, food and fuel prices should all help consumers in the coming months, but rising unemployment meant a quick recovery was unlikely.

"The thing that drives consumer behaviour more than anything else is: have I got a job," he told reporters.

The Chartered Institute of Personnel and Development has forecast that unemployment in Britain will rise close to the three million mark by the end of 2009.

Collapsed variety store group Woolworths was closing its final 200 stories on Tuesday, disappearing from the high street after 99 years and shedding 27,000 jobs.

More than one in seven British retail sites will be unoccupied by the end of the year as shops go out of business, researchers Experian said on Tuesday.

NO PROFIT WARNINGS

Debenhams, Britain's second-biggest department stores chain behind employee-owned John Lewis, reported a 3.5 percent drop in sales for the 18 weeks to Jan. 3 at stores open more than a year, better than many analysts had feared.

The group, which runs almost 150 stores across the UK and Ireland, also said pretax profit had risen over the period, confounding fears that big discounting in the run-up to Christmas would hit profits.

Debenhams, whose shares have plunged over 80 percent in the past two years on fears about its ability to pay off its debts, also eased some fears about its finances.

Debenhams shares leapt as much as 32 percent to 37.75 pence.

Next, Britain's second-biggest clothing retailer behind Marks and Spencer, said like-for-like sales at stores unaffected by new openings fell 7 percent in the 21 weeks to Dec. 24.

Some analysts had forecast a fall of up to 8 percent.

Next, which trades from over 460 stores in the UK and Ireland, also said it was comfortable with analysts' current profit forecast range of 415 million to 435 million pounds for the year ending Jan. 31.

Next was one of the few retailers that did not discount heavily in the run-up to Christmas, and said the first day of its post-Christmas clearance sale was its busiest ever.

Its shares rose nearly 14 percent to 1,242 pence.